Internal Control

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Department
Financial Accounting
Course
MGAB01H3
Professor
Liang Chen
Semester
Fall

Description
Internal Control Internal control consists of the policies and procedures within an organization that help achieve the following objectives: 1. Optimize the use of resources to reduce inefficiencies and waste 2. Prevent and detect errors and irregularities in the accounting process 3. Safeguard assets from theft, robbery, and unauthorized use 4. Maintain reliable control systems to enhance the accuracy and reliability of accounting records Principles of Internal Control Authorization of Transactions and Activities: Control is most effective when only one person is responsible for a task Segregation of Duties: Related activities should be assigned to different individuals and establishing the accountability (keeping the records) for an asset should be separate from the physical custody of that asset. When one individual is responsible for all of the related activities, the potential for errors and irregularities is increased. When one employee (the accountant) keeps the records of an asset, and a different employee (the custodian) keeps the asset itself, the employee who keeps the asset is unlikely to use it dishonestly. Documentation Procedures: Documents provide evidence that transactions and events have occurred. Documents should be prenumbered and all documents should be accounted for. Documents that are source documents f
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