Internal controls

Question 1

What are the 4 types of internal controls

Answer 1

Preventative controls
Detective controls
Corrective controls
Directive controls

Question 2

What are preventative controls?

Answer 2

Is used to deter or prevent an undesirable event from occurring

Question 3

What are detective controls?

Answer 3

Is used to detect undesirable events that have occurred

Question 4

What are corrective controls?

Answer 4

Is used to correct the effect of undesirable events

Question 5

What are directive controls?

Answer 5

Is used to discourage an undesirable event from occurring or encourage a desirable event to occur

Question 6

What are internal controls in a business?

Answer 6

The are systems and measures used in businesses to help ensure that the goals and objectives of the business are acheived

Question 7

Who are the designed by and why?

Answer 7

They are designed by management of the business to cater for the specific needs of that business

Question 8

What should internal controls be?

Answer 8

Effective in the prevention of errors, fraud and theft

Question 9

What should the objectives of internal controls include?

Answer 9

Ensure the financial information is reliable and accurate
Safeguarding the assests
Ensuring that employees adhere to the code of ethics

Question 10

What is the definition of internal accounting controls?

Answer 10

They ensure that the transactions of the business are recorded accurately and protect the business against financial loss due to fraud or error

Question 11

What are the objectives of the internal accounting control?

Answer 11

Income is received and correctly recorded
Assets are safeguarded
Liabilities are paid promptly
Records are accurate and reliable
Errors are detected

Question 12

What should the internal control process for cash receipts ensure?

Answer 12

That all cash intended for the business is received, promptly deposited, properly recorded, reconciled and kept under adequate security

Question 13

What are the procedures you need to adhere to for cahs reciepts?

Answer 13

Cash must be physically safeguarded
All receipts should be entered into the CRJ
Cash receipts should be posted promptly
Someone other than the bookkeeper should oper mail

Question 14

What should the internal control process for cash receipts ensure?

Answer 14

That cash is paid only upon proper authorization of management, for valid business purposes and that all payments are recorded properly

Question 15

What are the procedures you need to adhere to for cash reciepts?

Answer 15

All business debit cards should be safeguarded
Access to the business’s online banking facilities should be limited
Passwords should contain various characteristics
Limits should be set on online banking
Management should review the list of approved vendors
Cash payments should be posted promptly

Question 16

What should the internal control process for petty cash ensure?

Answer 16

That petty cash is only used for proper purposes, is adequately safeguarded and is recorded properly

Question 17

What are the procedures you need to adhere to for petty cash?

Answer 17

Safeguarding physically
Kept and used separately
Access should be limited
A limit to the amount
Supporting documentation should be required

Question 18

What should the internal control process for debtors ensure?

Answer 18

That debtors are creditworthy, credit sales are recorded properly, reconciliations are performed and outstanding accounts are adequately monitored

Question 19

What are the procedures you need to adhere to for debtors?

Answer 19

Credit checks should be performed
Sales orders should be approved
All credit sales should be approved
Write-offs and adjustments should be authorized
Interests should be charged on overdue accounts