Chapter 4

Question 1

Give examples of what an internal control system might require

Answer 1

• money limits for certain spends or personnel
• levels of authorisation for specific criteria of transactions
• Defining when a decision needs to be referred to someone else (specialist)

Question 2

Give reasons to why an internal control system is important

Answer 2

• eliminates possibility of serious errors
• reduces risk of fraud
• encourages smooth operations
• safeguards business assets
• ensures accuracy of financial reports and statements
• ensures compliance with government legislation

Question 3

give examples of areas where controls might be necessary

Answer 3

• bookkeeping and records
• ordering supplies
• payment authorisation
• cheque writing
• handling of cash

Question 4

Name the 8 types of control

Answer 4

• Segregation
• Organisation
• Authorisation
• Physical
• Supervision
• Personnel
• Arithmetical and accounting
• Management

Question 5

list 4 causes of weakness in an accounting system/function

Answer 5

• lack of controls
• poor implementation of controls
• poor/lack of leadership
• lack of monitoring existing controls

Question 6

Types of fraud

Answer 6

• theft
• false accounting
• bribery and corruption
• deception

Question 7

two categories of fraud

Answer 7

financial and non-financial

Question 8

What is a collusion?

Answer 8

Where an internal employee and outsider work together to falsify business records, such as a fake invoice for services that never occurred.

They both then enjoy the money paid

Question 9

List techniques to reduce risk of fraud in an organisation

Answer 9

• fraud staff
• management responsibility
• management supervision
• segregation of duties
• physical security
• authorisation