chapter 6 slides Flashcards
litigation
attorneys hiring accountants
internal contols do what
-prevent theft and embezzlement
-ensure accurate information
what are the basics of internal controls
SAPID
S-segregation of duties
A-authorization of transactions
P-protection of assets
I-independent checks and reconciliations
D-documentation
what is it important to never let accountants have control of
CASH
what does segregation of duties prevent
reduced opportunities for any one person to perpetuate and conceal a fraud
how do people prevent mistakes with segreation of duties
double-check each other’s work
what does authorization of transactions reduce
reduces the chance for non-responsible people to misappropriate bsuiness property
what does authorization of transactions establish
clear lines of responsibility
examples of duties that you seperate
-authorizing transacations (spedning decisions
-recording transactions (bookkeeping)
-custody f assets (check signer and receiving supplies)
what does protection of assets prevent
prevents circumvention of other internal controls and physical theft and harm
examples of protection of assets
-keep easily stolen assets locked up
-keep passwords
-protect against vandalism
what does independent checks and reconilation provide
a safety check to make sure the system is working properly
what does independent checks and reconilation compare
compare budgeted expenses and income to actual expenses and income
-compare physical assets with accounting records of assets
what does independent checks and reconilation balance
balance the checkbook at least once a month
what does independent checks and reconilation allow
allows independent auditors to examine the business financial system
purpose of documenation
provides a written record for every transaction
reason for documentation
-prevent fraud
-1 yr later, with no transaction, if someone ask why you did something, you wont just remember
what does documentation require
requires a receipt, authorization form, invoice, cancelled check or other written documentation for every transaction
when reconciling a bank accounr what do you look for
does the actual cash in the bank match what is on balance sheet?
what are you trying to find when reconciling bank account
errors, omissions, mistakes
