Chapter 14 Flashcards
What are control procedures?
Timesheets being approved
What are control objectives?
Ensure no fake overtime
What are risks?
Overtime is paid but not worked
What is tests of control (by auditor)?
pick an e.g., of timesheets to see if they are been signed
What is supervision in regards to internal control?
always be someone more senior than the person processing the transaction
What is organisation in regards to internal control?
clear roles and responsibilities to make sure that every control gets implemented, and by correct person
What is arithmetic and accounting in regards to internal control?
all transactions should be checked for arithmetic accuracy before getting approved
What is physical in regards to internal control?
ensuring the security and safe-keeping of the company’s assets
What is management in regards to internal control?
controls which allows management to run the business efficiently and effectively
What is authorisation in regards to internal control?
no one should be allowed to process a transaction without it being approvedq
What is personnel in regards to internal control?
making sure everyone is capable of performing tasks they are assigned to
What is segregation of duties in regards to internal control?
Division of responsibilities between more than one person to reduce risk of fraud
What is the purchasing system?
works in similar way to revenue system. Stages, risks procedures the same
What is the purchasing system order?
Order sent -> goods or services received -> invoice received - > payment of cash
When the goods are received what should be raised?
A GRN
When the invoice is received what should this be matched with
the GRN note
What are the steps of the payroll system?
Hours worked recorded -> payroll liability calculated -> payment to staff
What are the steps to the cash system?
Request for payment -> payment authorised - > payment made or receipt -> payment and receipts recorded
What does divisions of duties mean?
person signing cheque diff to person authorizing the recording of payment
What inventory method should be used and why?
FIFO method reduces the risk of obsolete items
What is the purpose of organisational control?
ensures; orderly and efficient conduct, safeguarding of assets, prevention and detection of fraud and error, accuracy and completeness, timely prep of reliable info
What are some adv of automated systems?
Quicker, fewer errors, more security, easier to sort and analyse data
What are some dis adv of automated systems?
Capital cost, training costs, malicious software, systems could crash
