Fundamental-Accounting-Principles-(8)

CashandInternalControlsChapter8PowerPointEditor:BethKane,MBA,CPACopyright@2015McGrawHillEducation..Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.08-C1:InternalControl28-3InternalControlSystemPoliciesandproceduresmanagersuseto:–Protectassets.–Ensurereliableaccounting.–Urgeadherencetocompanypolicies.–Promoteefficientoperations.C138-4Sarbanes-OxleyAct(SOX)TheSarbanes-OxleyActrequiresmanagersandauditorsofpubliccompaniestodocumentandcertifythesystemofinternalcontrols.C1Section404ofSOXrequiresthatmanagersdocumentandassesstheeffectivenessofallinternalcontrolprocessesthatcanimpactfinancialreporting.48-5PrinciplesofInternalControlInternalcontrolprinciplescommontoallcompanies:1.Establishresponsibilities.2.Maintainadequaterecords.3.Insureassetsandbondkeyemployees.4.Separaterecordkeepingfromcustodyofassets.5.Divideresponsibilityforrelatedtransactions.6.Applytechnologicalcontrols.7.Performregularandindependentreviews.C158-6TechnologyandInternalControlReducedProcessingErrorsMoreExtensiveTestingofRecordsLimitedEvidenceofProcessingCrucialSeparationofDutiesIncreasedE-CommerceC168-7LimitationsofInternalControlHumanErrorNegligenceFatigueMisjudgmentConfusionHumanFraudIntenttodefeatinternalcontrolsforpersonalgainC1Humanfraudtriple-threat:Opportunity,Pressure,andRationalization78-8LimitationsofInternalControlThecostsofinternalcontrolsmustnotexceedtheirbenefits.C18NEED-TO-KNOWIdentifythefollowingphrases/termsasbestlinkedwiththe(a)purposesofaninternalcontrolsystem,(b)principlesofinternalcontrol,or(c)limitationsofinternalcontrol.1)Protectassets2)Establishresponsibilities3)Humanerror4)Maintainadequaterecords5)Applytechnologicalcontrols6)Ensurereliableaccounting7)Insureassetsandbondkeyemployees8)Humanfraud9)Separaterecordkeepingfromcustodyofassets10)Divideresponsibilityforrelatedtransactions11)Cost-benefitprinciple12)Promoteefficientoperations13)Performregularandindependentreviews14)UrgeadherencetocompanypoliciesC19NEED-TO-KNOWa)PurposesofinternalcontrolsProtectassets.Promoteefficientoperations.Ensurereliableaccounting.Urgeadherencetocompanypolicies.1)Protectassetsa)Purposeofinternalcontrols2)Establishresponsibilities3)Humanerror4)Maintainadequaterecords5)Applytechnologicalcontrols6)Ensurereliableaccountinga)Purposeofinternalcontrols7)Insureassetsandbondkeyemployees8)Humanfraud9)Separaterecordkeepingfromcustodyofassets10)Divideresponsibilityforrelatedtransactions11)Cost-benefitprinciple12)Promoteefficientoperationsa)Purposeofinternalcontrols13)Performregularandindependentreviews14)Urgeadherencetocompanypoliciesa)PurposeofinternalcontrolsC110NEED-TO-KNOWa)PurposesofinternalcontrolsProtectassets.Promoteefficientoperations.Ensurereliableaccounting.Urgeadherencetocompanypolicies.b)PrinciplesofinternalcontrolsEstablishresponsibilities.Maintainadequaterecords.Insureassetsandbondkeyemployees.Separaterecordkeepingfromcustodyofassets.Divideresponsibilityforrelatedtransactions.Applytechnologicalcontrols.Performregularandindependentreviews.1)Protectassetsa)Purposeofinternalcontrols2)Establishresponsibilitiesb)Principlesofinternalcontrols3)Humanerror4)Maintainadequaterecordsb)Principlesofinternalcontrols5)Applytechnologicalcontrolsb)Principlesofinternalcontrols6)Ensurereliableaccountinga)Purposeofinternalcontrols7)Insureassetsandbondkeyemployeesb)Principlesofinternalcontrols8)Humanfraud9)Separaterecordkeepingfromcustodyofassetsb)Principlesofinternalcontrols10)Divideresponsibilityforrelatedtransactionsb)Principlesofinternalcontrols11)Cost-benefitprinciple12)Promoteefficientoperationsa)Purposeofinternalcontrols13)Performregularandindependentreviewsb)Principlesofinternalcontrols14)Urgeadherencetocompanypoliciesa)PurposeofinternalcontrolsC111NEED-TO-KNOWa)Purposesofinternalcontrolsc)LimitationsofinternalcontrolsProtectassets.Humanelementsinclude:Promoteefficientoperations.Humanerror.Ensurereliableaccounting.Humanfraud.Urgeadherencetocompanypolicies.Cost-benefitprinciple.b)PrinciplesofinternalcontrolsEstablishresponsibilities.Maintainadequaterecords.Insureassetsandbondkeyemployees.Separaterecordkeepingfromcustodyofassets.Divideresponsibilityforrelatedtransactions.Applytechnologicalcontrols.Performregularandindependentreviews.1)Protectassetsa)Purposeofinternalcontrols2)Establishresponsibilitiesb)Principlesofinternalcontrols3)Humanerrorc)Limitationsofinternalcontrols4)Maintainadequaterecordsb)Principlesofinternalcontrols5)Applytechnologicalcontrolsb)Principlesofinternalcontrols6)Ensurereliableaccountinga)Purposeofinternalcontrols7)Insureassetsandbondkeyemployeesb)Principlesofinternalcontrols8)Humanfraudc)Limitationsofinternalcontrols9)Separaterecordkeepingfromcustodyofassetsb)Principlesofinternalcontrols10)Divideresponsibilityforrelatedtransactionsb)Principlesofinternalcontrols11)Cost-benefitprinciplec)Limitationsofinternalcontrols12)Promoteefficientoperationsa)Purposeofinternalcontrols13)Performregularandindependentreviewsb)Principlesofinternalcontrols14)Urgeadherencetocompanypoliciesa)Purposeofinter