Terms Defined- Internal Controls

May 29th, 2015
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● Principles of Internal Controls ○ Establish Reposibilities ○ Maintian adequate records ○ Insure asstes and bond key employees ○ Separate recordkeeping from custody of assets ○ Divideresposnibilties for related transactions ○ Apply technological controls ○ Perfrom rrgular and independent reviews

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Chapter 6 Terms Defined- Internal ControlsInternal Control SystemProtect AssetsEnsure relaible accountingPrmote efficient operationsUrge adhrenece to company policiesSarbanes Oxley Act- requires mangers and auditors of companies whose stcok is traded on ana exchange to documents and certify the system of internal controlsPrinciples of Internal ControlsEstablish Reposibilities Maintian adequate recordsInsure asstes and bond key employeesSeparate recordkeeping from custody of assetsDivideresposnibilties for related transactionsApply technological controlsPerfrom rrgular and independent reviewsEstablish Repsonsibiloties:Responsibility for a task is clearly established and assigned to one personMaintianing Adequate records:Reliable records help manager monitor a companys transactions properlyInsure asstes and bond key employeesAn employee is bonded whena company purchases an insurance policy or a bond, against losses from theft by that employeeBonding reduces the risk of lossSeparate recordkeeping from custody of assetsA person who controls or has access to an asset must not keep that assets accounting recordsIn order to collude, agree in secret to commit a fraud, two or more people must agree to colludeDivideresposnibilties for related transactionsDivides responbilirty for a transaction between two or more individuals or departments.This is to ensure that the work of one idnividula acts as a check for the other.Separation of duties- not a dup

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