tailieunhanh - Lecture Survey of accounting (4/e) - Chapter 4: Internal controls, accounting for cash, and ethics

After you have mastered the material in this chapter, you will be able to: Identify the key elements of a strong system of internal control; prepare a bank reconciliation; discuss the role of ethics in the accounting profession; describe the auditor's role in financial reporting. | Chapter Four Internal Controls, Accounting for Cash, and Ethics © 2015 McGraw-Hill Education. 1 An Integrated Framework Control Environment – integrity and ethical values of a company Risk Assessment – management identification of potential risks Control Activities – internal controls Information and Communication – internal and external reporting process Monitoring – over time assessment and correction of internal controls 4-2 2 Internal Controls Separation of Duties Quality of Employees Bonded Employees Required Absences Procedures Manual Authority and Responsibility Prenumbered Documents Physical Control Performance Evaluations 4-3 3 Separation of Duties When duties are separated, the work of one employee can act as a check on the work of another employee. The likelihood of fraud or theft is greatly reduced. 4-4 4 Quality of Employees The ability of cross-trained employees to substitute for one another prevents disruptions in the workplace. Job rotation may help relieve boredom and | Chapter Four Internal Controls, Accounting for Cash, and Ethics © 2015 McGraw-Hill Education. 1 An Integrated Framework Control Environment – integrity and ethical values of a company Risk Assessment – management identification of potential risks Control Activities – internal controls Information and Communication – internal and external reporting process Monitoring – over time assessment and correction of internal controls 4-2 2 Internal Controls Separation of Duties Quality of Employees Bonded Employees Required Absences Procedures Manual Authority and Responsibility Prenumbered Documents Physical Control Performance Evaluations 4-3 3 Separation of Duties When duties are separated, the work of one employee can act as a check on the work of another employee. The likelihood of fraud or theft is greatly reduced. 4-4 4 Quality of Employees The ability of cross-trained employees to substitute for one another prevents disruptions in the workplace. Job rotation may help relieve boredom and increase productivity. 4-5 5 Bonded Employees A fidelity bond provides insurance that protects a company from loss caused by employee dishonesty. To become bonded, an employee’s background is investigated. 4-6 6 Required Absences An employee may be able to cover up fraudulent activities if they are always present at work. All employees should be required to take regular vacations and their duties should be rotated periodically. 4-7 7 Procedures Manual Accounting and other important procedures should be written in a procedures manual. Periodically, management should conduct an investigation to see that required procedures are actually being followed. 4-8 8 Authority and Responsibility General authority applies to all members of the organization. For example, all employees are required to fly coach and purchase airline tickets from a specific vendor. Specific authority applies only to a specific position within the organization. For example, all checks must be cosigned by the Controller