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ACCT201 Ch. 6

Terms in this set (8)

Principles of Internal Control
-Establish Responsibilities
-Maintain Adequate Records
-Insure Assets and Bond Key Employees
-Separate Record-keeping from Custody of Assets
-Divide Responsibility for Related Transactions
-Apply Technological Controls
-Perform Regular and Independent Reviews
Establish Responsibilities
Responsibility for a task should be assigned to one person. If responsibility is not established, determining who is at fault is difficult.
Maintain Adequate Records
Good recordkeeping helps protect assets and helps managers monitor company activities.
Insure Assets and Bond Key Employees
Assets should be insured, and employees handling cash and easily transferable assets should be bonded.
Separate Record-keeping from Custody of Assets
An employee who has access to an asset must not have access to that asset's accounting records.
Divide Responsibility for Related Transactions
Responsibility for a transaction should be divided between two or more individuals or departments. One person's work is a check on the others to prevent errors. This is not duplication of work.
Apply Technological Controls
Use technology such as ID scanners to protect assets and improve control.
Perform Regular and Independent Reviews
Regular reviews of internal controls should be performed by outside reviewers, preferably auditors.
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