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11 Cards in this Set
- Front
- Back
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Fraud Triangle |
Opportunity, Financial Pressure, Rationalization |
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5 Components of Internal Control |
1. A control Environment 2. Risk Assessment 3. Control Activities 4. Info and Communication 5. monitoring |
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6 principles of Control Activities |
1. Establishment of Responsibilities 2. Segregation of Duties 3. Documentation Procedures 4. Physical Controls 5. Independent Internal Verification 6. Human Resource Controls |
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Establishment of Responsibilies |
control is most effective when only one person is responsible for a given task |
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Segregation of Duties |
1. different individuals should be responsible for related activities 2. the responsibility for record-keeping for an asset should be separate from the physical custody of that asset The work of one employee should, without a duplication of effort, provide a reliable basis for evaluating the work of another employee. |
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documentation procedures |
1. companies should use prenumbered docs, and all docs should be accounted for 2. the control system should require that employees promptly forward source docs for accounting entries to the acct. department |
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independent internal verification |
1. companies should verify records periodically or on a surprise basis 2. an employee who is independent of the personnel responsible for the info should make the verification 3. discrepancies and exceptions should be reported to a management level ex) reconciliation of cash register tape with the cash in the register; bank reconciliation |
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human resource controls |
1. bonding 2. rotate duties and require vacation 3. background checks |
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reasonable assurance |
costs of establishing control procedures should not exceed their expected benefit |
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collusion |
two or more individuals work together to get around prescribed controls |
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Cash over and short (not involving petty cash) |
* reported as miscellaneous expense when there is a cash shortfall * reported as a miscellaneous revenue when there is a cash overage |
