tailieunhanh - Lecture Financial accounting (3/e): Chapter 4 - Spiceland, Thomas, Herrmann

Chapter 4 - Cash and internal controls. After studying this chapter, you should be able to: Discuss the impact of accounting scandals and the passage of the Sarbanes-Oxley Act; identify the components, responsibilities, and limitations of internal control; define cash and cash equivalents; understand controls over cash receipts and cash disbursements; reconcile a bank statement. | Cash and Internal Controls Chapter 4 1 Learning Objectives Discuss the impact of accounting scandals and the passage of the Sarbanes-Oxley Act Identify the components, responsibilities, and limitations of internal control Define cash and cash equivalents Understand controls over cash receipts and cash disbursements Reconcile a bank statement Learning Objectives Account for petty cash Identify the major inflows and outflows of cash Assess earnings quality by comparing net income and cash flows Part A Internal Controls 4-4 The two key roles of financial accounting are to measure business activities and to communicate those activities to external decision makers. For the measurement/communication process to be useful, the financial statements have to be accurate. There have been instances in the past where financial statements published were incorrect. In this chapter, we will explore how this could happen and what can be done to prevent it. 4 Incorrect Financial Statements Reasons Errors—accidental errors in recording transactions or applying accounting principles Fraud—a person intentionally deceives another person for personal gain or to damage that person Occupational fraud: the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employer’s resources. There are two reasons for companies to issue incorrect financial statements—errors and fraud. Errors are accidental errors in recording (or failing to record) transactions or in applying accounting rules. Though these errors are unintentional, they create confusion and could affect investor and creditor confidence. Fraud occurs when a person intentionally deceives another person for personal gain or to damage that person. Occupational fraud is the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employer’s resources. The first source of occupational fraud is misuse of company resources. The second source of . | Cash and Internal Controls Chapter 4 1 Learning Objectives Discuss the impact of accounting scandals and the passage of the Sarbanes-Oxley Act Identify the components, responsibilities, and limitations of internal control Define cash and cash equivalents Understand controls over cash receipts and cash disbursements Reconcile a bank statement Learning Objectives Account for petty cash Identify the major inflows and outflows of cash Assess earnings quality by comparing net income and cash flows Part A Internal Controls 4-4 The two key roles of financial accounting are to measure business activities and to communicate those activities to external decision makers. For the measurement/communication process to be useful, the financial statements have to be accurate. There have been instances in the past where financial statements published were incorrect. In this chapter, we will explore how this could happen and what can be done to prevent it. 4 Incorrect Financial Statements Reasons .