Topic 2 post review minimum of 150 words

Topic 2 post review minimum of 150 words

clinton

As a manager, I should have clear understanding of internal controls. Internal controls promote efficiency and effectiveness. Internal controls over assets promotes whether the cash is adequate, and manageable. (While efficiency refers to how well something is done, effectiveness refers to how useful something is). A lack of effective internal controls over financial reporting could result in the inability to report our financial results accurately, which could lead to a loss of investor confidence in our financial reports, and have an adverse effect on our stock price.

A weak internal control over cash or even inventory handling may result in fraud or other criminal activities. Millions of dollars are lost every day in businesses due to fraudulent activities. As a manager I would take the time to explain to my manager that yes, it’s great that you trust your employees, but don’t let them run the store, you run the store. Control the environment being an accountant of ABC Inc.; I would try to resolve the situation as follows:

1. Segregate all duties. Create multiple steps for each process resulting in no single individual has total control over two or more phases of a transaction or an operation. The benefits in this process are that 1.) This ensures that errors or irregularities are controlled or corrected on a regular basis. 2.) This prevents the desire or the opportunity for fraud to occur, because this requires two or more people to work together in the conspiring of an activity.
2. Access Controls. Controlling access to different parts of an accounting system via passwords, lockouts, and electronic access logs can keep unauthorized users out of the system while deterring attempts at fraudulent activities, as well as, providing a way to audit the usage of the system to identify the source of errors or discrepancies.
3.  Create a System of Physical Inventory Count. With a regular counting of the inventory, materials, tools, even cash count this prevents the desire to steal, letting employees know that you have created security and control over the environment.

3.) Create a Risk Analysis. Review the possible opportunities for things to go wrong, and how can they be corrected. (In other words, review what ifs.)

4.) Correct errors promptly. Failure to take corrective action to errors or mistakes can lead to possible criminal acts.

5.) Create logs of the documentation. Record the transactions of cash: Are all records of cash transactions properly recorded, with accuracy against the receipts, the invoices, the accounts payable, the accounts receivable, revenue, and expenses. Completeness: Are all transactions and accounts that should be included in the financial statements actually included?

4. Create a Trial Balance on a Daily or Weekly Basis. With a trial balance, this guarantees the accuracy, valuation, and allocation of money — Are cash transactions valued appropriately? Are opening cash accounts included in the financial statements at appropriate amounts, and any resulting valuation or allocation adjustments recorded appropriately? Cash flow statements must be maintained on a regular basis.

5. Reconciliation: Are the bank reconciliations performed on a consistent basis. With a bank reconciliation this guarantees no mistakes have been made by either the bank or the company, and if so the opportunity to quickly correct the mistakes.

6. Create an Authoritative or Managerial Figure. Cash payment should be pre-authorized. Requiring specific managers to authorize certain types of transactions provides a level of responsibility to the accounting records, by providing documentation that the transactions have been seen, analyzed, and approved by appropriate authorities.

Reference:

 Ingram. D. (2017). What Are the Seven Internal Control Procedures in Accounting? Retrieved from:http://smallbusiness.chron.com/seven-internal-control-procedures-accounting-76070.html

Sproat A. (2016). Segregation of Duties: The Key to Proper Controls and Minimizing Fraud Retrieved from: http://www.bbcpa.com/segregation-of-duties-the-key-to-proper-controls-and-minimizing-fraud/

Top Ten Things to Strengthen Internal Controls in the Office. Retrieved from: https://www.sai.ok.gov/Search%20FormsPubs/database/TopTenThingsICanDoToStrengthenInternalControlsInMyOfficeDocBW.pdf

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