Internal Controls What Are the

Internal Controls What are the Internal Controls over Financial Reporting? WorkBoard's of America has internal controls with the following procedures.

We are to match the procedure to the corresponding financial reporting control objective -- can you double check me and let me know if you believe I got this correct or not? Financial Financial Reporting Control Objective Only the treasurer may sign Checks Ensure adequate records are maintained The treasurer is not allowed to make bank deposits Ensure transactions are authorized and properly recorded The company's checks are pre-numbered Prevent or detect unauthorized activities involving the company's assets The answers I came up with were as follows: B C A Did I get this correct? YES.

The treasurer is one of the people authorized to sign checks, which means that any transaction is both authorized and recorded. Because the treasurer keeps the firm's financial records, he or she should not be allowed to actually handle the cash. Pre-numbered checks are the most effective way of ensuring adequate records are maintained, as they avoid number duplication or omission that could lead to confusion during the reconciliation process. B.

Next task is to Identify Internal Control Procedure and Financial Reporting Control Objective: At most movie theaters, one employee sells tickets and the other employee collects them. One night, when you are at the movies, your friend comments that this is a waste of the theaters' money. 1. Identify the name of the control procedure and control objective to which this situation relates.

The answer I came up was: Need for Reconciliation -- is this correct? I don't have the book, but my list of internal control procedures indicates Segregation of Duties. The purpose of this is to minimize the likelihood of fraud, because multiple people are involved in the transaction. The need for reconciliation is important here because it allows management to match the transactions with the money taken in for those transactions.

The stubs presumably have numbers on them, which would allow management to reconcile specific stubs, but even at that management would have no way to actually track the transaction, it would simply know that a stub was missing, or that there were more stubs than money. So the need for reconciliation is important, but in this case if there is an option for Separation of Duties that would be more important.

In addition, reconciliation is only possible if the stubs have the value of the ticket on them -- otherwise it is only possible to know how many customers there are, but not if some of them were seniors, children, students, matinee customers or any other group subject to a discount. The control objective is to minimize the risk of fraud in the transaction. 2. Explain to your friend what could happen if the same person did both jobs. If the same person did.