5. Cash and internal controls Flashcards
internal control
The system of policies and procedures used in a company to promote:
- – efficient* and effective operations,
- – reliable* financial reporting and
- – compliance* with laws and regulations.
Internal control – integrated framework states that good internal control consists of the following five interrelated components:
● ___________
● ___________
● ___________
● ___________
● ___________
Internal control – integrated framework states that good internal control consists of the following five interrelated components:
● control environment
● risk assessment
● control activities
● information and communication
● monitoring.
control environment
The atmosphere in which the members of an organisation conduct their activities and carry out their responsibilities.
risk assessment
The identification and analysis of the risks that threaten the achievement of organisational objectives.
control activities
The policies and procedures established to address the risks that threaten the achievement of organisational objectives.
Although specific control activities vary widely across organisations, they generally fall into one of several categories:
● ____________
● ____________
● ____________
● ____________
● ____________
Although specific control activities vary widely across organisations, they generally fall into one of several categories:
● establishing responsibility
● maintaining adequate documentation
● segregation of duties
● physical security
● independent verification.
information and communication
Required for the open flow of relevant information throughout an organisation.
monitoring
The assessment of the quality of an organisation’s internal control.
bank reconciliation
The process of reconciling the differences between the cash balance on a bank statement and the cash balance in a business’ records.
A bank reconciliation is prepared as follows:
- Reconcile the _______ _______ to the actual _______ _______.
- Reconcile the business’ _______ _______ to the actual _______ _______.
- Adjust the business’ _______ _______ to the actual _______ _______.
A bank reconciliation is prepared as follows:
- Reconcile the bank balance to the actual cash balance.
- Reconcile the business’ book balance to the actual cash balance.
- Adjust the business’ book balance to the actual cash balance.
deposit in transit
A deposit that has been made by the business but has not cleared the bank as of the statement date.
outstanding cheque
A cheque that has been distributed by the business but has not cleared the bank as of the statement date.
petty cash fund
An amount of cash kept on hand to pay for minor expenditures.
While the size and scope of a petty cash fund will vary across businesses, its operation will involve the following three activities:
● ____________
● ____________
● ____________
While the size and scope of a petty cash fund will vary across businesses, its operation will involve the following three activities:
● establishing the fund
● making payments from the fund
● replenishing the fund.
cash
A medium of exchange.
