Internal control

Question 1

What is internal control?

Answer 1

refers to a set of procedures set by an organization to ensure the accuracy, reliability, and integrity of its financial reporting, safeguard its assets, promote operational efficiency, and ensure compliance with laws and regulations.

Question 2

State the control principles

Answer 2

Separation of duties
Authorization and approval
Custodial and security arrangements
Review and reconciliation
Documentation
Physical control
Training and supervision
Cost/benefit

Question 3

What is separation of duties

Answer 3

Duties are divided so that no one person has complete control over a key function or activity

Question 4

What is authorization and approval

Answer 4

Proposed transactions are authorized when they are consistent with policy and funds available

Question 5

What is custodial and security arrangements

Answer 5

Responsibility for custody of assets is separated from related recordkeeping

Question 6

What is review and reconciliation

Answer 6

Records are examined and reconciled to determine that transactions were properly processed and approved

Question 7

What is documentation

Answer 7

Well documented policies and procedures promote employee understanding of jobs duties and help ensure continuity during employee absences or turnover

Question 8

What is physical control

Answer 8

Equipment, inventories, cash and other assets are secured physically, counted periodically and compared with amounts shown on control records

Question 9

What is training and supervision

Answer 9

Well trained and supervised employees help ensure that control processes functions properly

Question 10

What is cost/benefit

Answer 10

Cost associated with control processes should not exceed expected benefits