POLICIES, PROCEDURES AND CONTROLS

Question 1

POLICIES

Answer 1

STATEMENT OF HOW TO DEAL WITH A MATTER OR A SET OF CIRCUMSTANCES

• A policy is a high level description about what to do in particular situations.
• Accounting policies will describe how different types of financial transactions are dealt with and reported in the financial statements.
• For example (Sales are reported excluding VAT)

Question 2

PROCEDURES

Answer 2

SET OF ACTIONS THAT SHOULD OR MUST BE DONE
- Actions to be taken when processing financial transactions.
For example: Invoices are written into the sales day book, before the invoice is dispatched to the customer.

Question 3

CONTROLS

Answer 3

SET OF PROCEDURES DESIGNED TO REDUCE THE RISK OF ERROS IN THE FINANCIAL STATEMENT AND RISK OF FINANCIAL LOSS.