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Internal Control

The document outlines essential internal control measures across various financial areas including cash management, accounts receivable, inventories, fixed assets, liabilities, stock equities, income, and expenses. Key practices include segregation of duties, regular reconciliations, proper authorization, and compliance with regulations. These measures aim to enhance governance, ethics, risk management, and internal control within an organization.

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Laika Torotoro
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4 views2 pages

Internal Control

The document outlines essential internal control measures across various financial areas including cash management, accounts receivable, inventories, fixed assets, liabilities, stock equities, income, and expenses. Key practices include segregation of duties, regular reconciliations, proper authorization, and compliance with regulations. These measures aim to enhance governance, ethics, risk management, and internal control within an organization.

Uploaded by

Laika Torotoro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Governance, Ethics, Risk Management and Internal Control

Assignment: Internal Control


1. Cash and Cash Equivalents (Investment Securities)
Segregation of Duties: Separate duties for cash handling, recording, and authorization.
Bank Reconciliation: Reconcile bank statements and cash records on a monthly basis.
Authorization & Approval: Authorize cash disbursements and investments.
Physical Security: Store cash in safes and restrict access to authorized personnel.
Restricted Access: Implement dual authorization for electronic fund transfers.
Investment Monitoring: Monitor investment securities regularly for valuation and risk.
2. Accounts Receivable
Credit Approval Process: Establish a policy for credit sales approval to reduce bad debts.
Invoice Verification: Account for all sales through invoices and supporting records.
Aging Analysis: Review outstanding receivables regularly and follow up on overdue
accounts.
Segregation of Duties: Separate credit approval, invoicing, and collection responsibilities.
Write-Off Procedures: Obtain approval for any bad debt write-offs.
3. Inventories
Physical Counts: Take inventory counts regularly and reconcile to records.
Access Controls: Limit warehouse and storage access to authorized employees.
Documentation: Maintain proper records of purchases and sales.
Segregation of Duties: Separate purchasing, receiving, and recording responsibilities.
FIFO/LIFO Method: Use consistent inventory valuation methods.
4. Fixed Assets / Property, Plant, and Equipment
Asset Tagging: Tag assets for tracking and verification.
Physical Verification: Verify assets regularly physically.
Authorization: Obtain approval for asset purchases, disposals, or transfers.
Depreciation Policy: Use consistent depreciation methods and record them accordingly.
Insurance Coverage: Cover assets against loss or damage.
5. Liabilities
Proper Authorization: Obtain approval prior to incurring liabilities.
Reconciliation: Reconcile liabilities regularly with supporting documents.
Loan & Debt Monitoring: Monitor due dates and pay on time.
Vendor Verification: Verify supplier legitimacy prior to making payments.
Compliance Checks: Ensure tax and loan covenants compliance.
6. Stock Equities
Ownership Records: Maintain current shareholder and capital contribution records.
Dividend Approval: Obtain board approval for dividend distributions.
Segregation of Duties: Distinguish recordkeeping, authorization, and issuance of shares.
Regulatory Compliance: Comply with SEC and tax regulations.
Financial Statement Disclosure: Accurately disclose equity changes in financial statements.
7. Income/Revenues
Sales Authorization: Ensure proper documentation for all sales transactions.
Segregation of Duties: Distinguish between sales recording, billing, and cash collection.
Revenue Recognition Policy: Adhere to GAAP/IFRS for proper revenue recognition.
Reconciliation: Reconcile sales records with bank deposits and accounting entries.
Fraud Prevention: Use controls against fictitious sales or revenue misstatements.

8. Expenses
Budgetary Controls: Set spending limits and budget approvals.
Expense Documentation: Demand receipts and supporting documents for all expenses.
Approval Process: Use multi-level approval for high-value expenses.
Segregation of Duties: Distinguish expense authorization, recording, and payment.
Regular Reviews: Regularly review expenses for irregularities or fraud.

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