tailieunhanh - Lecture Introduction to financial accounting - Chapter 7: Fraud, internal control, and cash

Chapter 7 - Fraud, internal control, and cash. Learning objectives of this chapter include: Define fraud and internal control, identify the principles of internal control activities, explain the applications of internal control principles to cash receipts, explain the applications of internal control principles to cash disbursements, describe the operation of a petty cash fund,. | FRAUD, INTERNAL CONTROL, AND CA$H 7 1 all the related methods and measures adopted within a business to: safeguard its assets - Employee and external theft, unauthorized use enhance accuracy and reliability of accounting of its accounting records. - Mistakes, errors, fraudulent misrepresentations 2 Internal Control consist of . . . . . Applies to publicly traded . corporations. Required to maintain a system of internal control. Corporate executives and boards of directors must ensure that these controls are reliable and effective. Independent outside auditors must attest to the adequacy of the internal control system. SOX created the Public Company Accounting Oversight Board (PCAOB). Fraud and Internal Control The Sarbanes-Oxley Act (2002) 3 Accounting has several “branches” or areas of specialization. - Bookkeeping - Auditing - Tax - Advisory services, consulting In an audit, CPA’s evaluate a company’s internal controls to determine how much to check out. - They also use this to provide their published opinion on the reliability of the accounting reporting system. Consultants suggest improvements to systems. Accountants and Internal Controls 4 Fraud Dishonest act by management or employee that results in personal benefit at a cost to the employer. Three factors that contribute to fraudulent activity. 5 Example: Konk Co makes cash sales to customers. Employees sell product, collect cash, deposit the cash in the bank and record the transactions in the accounting records. How could the company be ripped off? By whom and when. Also think of how they could get caught. The 6 IC PRINCIPLES Establish responsibility centers Make individuals or specific groups accountable for specific tasks under their control Example: One cashier per register. At end of shift, agree cash received to register tape. If differences, cashier is responsible. 6 Segregate employee duties. Don’t allow only one person to have both: - Physical custody (or authority over) of asset - | FRAUD, INTERNAL CONTROL, AND CA$H 7 1 all the related methods and measures adopted within a business to: safeguard its assets - Employee and external theft, unauthorized use enhance accuracy and reliability of accounting of its accounting records. - Mistakes, errors, fraudulent misrepresentations 2 Internal Control consist of . . . . . Applies to publicly traded . corporations. Required to maintain a system of internal control. Corporate executives and boards of directors must ensure that these controls are reliable and effective. Independent outside auditors must attest to the adequacy of the internal control system. SOX created the Public Company Accounting Oversight Board (PCAOB). Fraud and Internal Control The Sarbanes-Oxley Act (2002) 3 Accounting has several “branches” or areas of specialization. - Bookkeeping - Auditing - Tax - Advisory services, consulting In an audit, CPA’s evaluate a company’s internal controls to determine how much to check out. - They also