Internal control systems…
Policies and procedures used to;
- protect assets
- ensure reliable accounting
-Upholding company policies
- promote efficient operations
Sarbanes - oxley act
Requires managers and auditors of public companies to document and certify system of internal control
5 components of internal control
- Control environment
- risk assessment
- Control activities
- information and communication
- Monitoring
Principles of internal Control
- Establish responsibility
- Maintain adequate records
- Insure assets and key employees
- separate record keeping from custody of cash
- Divide responsibility for related transactions
- Apply technological controls
- Perform regular and independent reviews
Limitations of internal control
Human error, human fraud
Liquid assets
Cash and similar assets that are always ready to use
Control of cash
Internal control system that protects cash and cash equivalents
Control of cash guidelines
- Handling cash is separated from record keeping
- cash disbursements are made by check
- cash receipts are promptly deposited into bank
Cash Management
- plan cash receipts to meet cash payments when due
- keep a minimum level of cash necessary to operate
If cash is over
Credit Cso
It cash is short
Debit CSO
Basic bank Services
Signature cards
Bank accounts
Deposit ticket
Checks
Electronic signatures
Bank statements
Days sales uncollected ratio
Ar/ Net sales x 365
