ACCT 001 Lecture Notes - Lecture 9: Internal Control, Financial Statement, Petty Cash
23 Dec 2020
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Document Summary
Increases efficiency and effectiveness of operations: reduce risk of asset lose, help ensure the reliability of financial statements, help ensure compliance with laws and regulation. Its effectiveness is a state or condition of the process at one or more points in time. Everyone is involved ie directors, managers, employees. Can only provide reasonable assurance rather than absolute assurance, regarding the achievement of an entity"s objectives. Limitations: limited by problems of human judgement, managers may override effective internal control systems, cost vs benefit, collusion among employees. All components must be present and function effectively to control" reliability of financial reporting. Example of control activities: top-level reviews: managers carry out reviews of actual performance compared to budgets, forecasts and prior period results. Information processing: controls are used to check accuracy, completeness and correct authorisation of transactions. If differences arise between count of cash and what the records show, it can be investigated: physically protected sensitive assets.
