MGAB03H3 Lecture Notes - Income Statement, Electronic Funds Transfer, Subledger

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The process that management designs and implements to achieve: reliable financial reporting, effective/efficient operations, and compliance with laws/regulations. Principles of internal control: authorization, safeguarding assets and records, segregation of duties, independent verification, documentation procedures, other controls. Make specific employees responsible for specific tasks. Most effective when only one person is responsible for a single task. Employees with similar jobs should be separated from each other to prevent collusion. Physical counting and theoretical counting should not be responsibilities of one person. Documentation should be used to support the transactions in regards to merchandise and cash. Mechanical/electronic controls to protect assets can be used. Vaults, warehouses, passwords, alarms, sensors, and time clocks are all measures of physical control. Reviews should be conducted by people with very little relations to the employee being reviewed. Exceptions should be reported to management to correct the situation. Internal auditors belong to the company and conduct evaluations of employees.

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