In this chapter students will be able to: Explain the activities that help prevent fraud and achieve internal control, apply control activities to cash receipts, apply control activities to cash payments, including petty cash, describe the control features of a bank account and prepare a bank reconciliation, report cash on the balance sheet. | Internal Control and Cash Internal control Fraud Internal controls and activities Limitations of internal control Cash controls Internal controls over cash receipts and payments Using a bank Using and reconciling a bank account Reporting cash Copyright John Wiley & Sons Canada, Ltd. 2 CHAPTER 7: Internal Control and Cash Copyright John Wiley & Sons Canada, Ltd. 3 Explain the activities that help prevent fraud and achieve internal control. Apply control activities to cash receipts. Apply control activities to cash payments, including petty cash. Describe the control features of a bank account and prepare a bank reconciliation. Report cash on the balance sheet. Fraud An intentional dishonest act Results in personal financial benefit by: Misappropriating (stealing) assets, or Misstating financial statements Three factors that contribute to fraud: Opportunity to commit fraud Financial pressure Rationalization (justify their actions) 4 Copyright John Wiley & Sons Canada, Ltd. Internal Control Related methods and measures that management designs and implements to help achieve: Reliable financial reporting Effective and efficient operations Compliance with laws and regulations Effective internal control systems have five basic components: Control environment Risk assessment Control activities Information and communication Monitoring Copyright John Wiley & Sons Canada, Ltd. 5 Internal Control Systems Control environment Create a culture that values clear rules and expects everyone to follow the rules Risk assessment Identify and analyze factors that create risk, and determine how to manage Control activities Design policies and procedures to address the risks faced by the company Copyright John Wiley & Sons Canada, Ltd. 6 Internal Control Systems 2 Information and communication Identify, collect and communicate relevant information to appropriate parties Monitoring Identifying and reporting problems to appropriate levels where action can be taken Copyright John Wiley & . | Internal Control and Cash Internal control Fraud Internal controls and activities Limitations of internal control Cash controls Internal controls over cash receipts and payments Using a bank Using and reconciling a bank account Reporting cash Copyright John Wiley & Sons Canada, Ltd. 2 CHAPTER 7: Internal Control and Cash Copyright John Wiley & Sons Canada, Ltd. 3 Explain the activities that help prevent fraud and achieve internal control. Apply control activities to cash receipts. Apply control activities to cash payments, including petty cash. Describe the control features of a bank account and prepare a bank reconciliation. Report cash on the balance sheet. Fraud An intentional dishonest act Results in personal financial benefit by: Misappropriating (stealing) assets, or Misstating financial statements Three factors that contribute to fraud: Opportunity to commit fraud Financial pressure Rationalization (justify their actions) 4 Copyright John Wiley & Sons Canada, Ltd. Internal .
