principles of internal control

Question 1

establishment of responsibility

Answer 1

• one person responsible for a given task
• limiting access to only one personnel and then identifying that personnel
• ex. transfer of cash drawers

Question 2

segregation of duties

Answer 2

• different individuals should be responsible for related duties
• ex. the responsibility for record keeping for an asset should be separate from the physical custody of that asset

Question 3

documentation procedures

Answer 3

• companies should use pre numbered documents
• all documents should be accounted for
• employees should promptly forward source documents for accounting procedures to the accounting department
• ex. pre numbered invoices

Question 4

physical controls

Answer 4

safes, vaults, time clocks, pass key access, etc.

Question 5

independent internal verification

Answer 5

• records periodically verified by an employee who is independent
• discrepancies reported to management

Question 6

human resource controls

Answer 6

• bond employees who handle cash
• rotate employees’ duties
• require vacations
• conduct background checks