MGAB01H3 Lecture : Internal Control
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MGAB01H3 Full Course Notes
Verified Note
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Document Summary
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 for accounting entries should be promptly forwarded to the accounting department. This control measure helps to ensure timely recording of the transaction.
