Description
What two internal controls should be used after eliminating extraordinary items from financial statements and explain why?
Explanation & Answer
The two internal controls that should be used and in that order are :
1st Separation of duties
Separation of duties is the means by which no one person has sole control over the lifespan of a transaction. Ideally, no one person should be able to initiate, record, authorize and reconcile a transaction.
2nd Reconciliation
Reconciliation is the process of comparing transactions and activity to supporting documentation. Further, reconciliation involves resolving any discrepancies that may have been discovered.
Once separation of duties is applied you have a frame to assign blame for errors
Then reconciliation will resolve those errors and clarify if they where intentional or not
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