You have just heard that the bookkeeper of the local worship center has embezzlement charges. She is paid $500 a month and she works alone. Her accounting records are sent to a CPA firm. She also drives a new Lexus. The worship center leadership described that she did volunteer for the job with no experience.
Write at least 100 words that would detail what the leadership of the worship center should do now with internal control procedures. Name at least 2 Internal Control Procedures that the business can put into place.
Internal Control Procedures internal control procedures: Whether the business is a small business that generates less than $10,000 in annual sales Competent, Reliable, and Ethical Personnel or a large business generating $10 billion in annual sales, all companies need the following Employees should be competent, reliable, and ethical . Paying good salaries will attract high- quality employees . Employees should also be trained to do the job, and their work should be adequately supervised. Assignment of Responsibilities In a business with good internal controls, no duty is overlooked. Each employee has certain, carefully defined responsibilities. For example, in a large company, the person in charge of signing checks is called the treasurer. The chief accounting officer is called the controller. Even an entry-le ! bookkeeper, whose job includes recording accounting transactions accurately, has clear consibilities. This assignment of responsibilities creates job accountability, thus ensuring important tasks get done. Separa 10 of Duties Smart management policies divide responsibilities between two or more people. Separation of dutie Imits fraud and promotes the accuracy of the accounting records. Separation of duties can be divided into two parts: 1. Separating operations from accounting. Accounting should be completely separate from the operating departments, such as production and sales. What would happen if sales personnel recorded the company's revenue? Sales figures could be inflated, and then top managers would not know how much the company actually sold. 2. Separating the custody of assets from accounting. Accountants must not handle cash, and cashiers must not have access to the accounting records. If one employee has both duties, that employee could steal cash and conceal the theft in the accounting records. The treasurer of a company handles cash, and the controller accounts for the cash. Neither person has both responsibilities. This control applies to all assets, not just cash. a company's both internal and external audits. Remember that an audit is an examination of To assess the adequacy and accuracy of their accounting records, most companies perform financial statements and accounting system by a trained accounting professional called an auditor. Internal audits are performed by employees of the company. External audits are To evaluate the accounting system, auditors must examine the internal controls and test them to ensure the controls are working properly. For example, a control might require of payments greater than $50 to determine whether all payments were properly authorized Audits performed by independent auditors who are not employees of the company. by a manager Documents be Documents provide the details of business transactions and include invoices and orders which may paper or electronic. Documents should be prenumbered to prevent theft and inefficiency. A gap in the numbered sequence draws attention. For example, for Smart Touch Learning, a key document is the sales invoice. The man ager can compare the total cash sales on the invoices with the amount of cash received and deposited into the bank account. Electronic Devices Accounting systems are relying less on paper documents and more on electronic docu- ments and digital storage devices. For example, retailers control inventory by attaching an electronic sensor to merchandise. The cashier removes the sensor after a sale is made. If a customer tries to leave the store with the sensor attached, an alarm sounds. Devices such as these can significantly reduce theft. E-Commerce E-commerce creates its own unique types of risks. Hackers may gain access to confidential information, such as account numbers and passwords, or introduce computer viruses, Trojans, or phishing expeditions. To address the risks posed by e-commerce, companies have devised a number of security measures. One technique for protecting customer data is encryption Encryption rearranges plain-text messages by a mathematical process. The encrypted mes- sage cannot be read by those who do not know the code. An accounting encryption example uses check-sum digits for account numbers. Each account number has its last digit equal to the sum of the previous digits. For example, consider customer number 2237, where 2 + 2 + 3 = 7. Any account number failing this test triggers an error message. Another technique for protecting data is firewalls. Firewalls limit access into a local network. Members can access the network, but nonmembers cannot. Usually several firewalls are built into the system. At the point of entry, additional security measures, such as passwords, PINs (personal identification numbers), and signatures are used. For additional security, more sophisticated firewalls are used deeper in the network to protect more sensitive data Internal Control Procedures internal control procedures: Whether the business is a small business that generates less than $10,000 in annual sales Competent, Reliable, and Ethical Personnel or a large business generating $10 billion in annual sales, all companies need the following Employees should be competent, reliable, and ethical . Paying good salaries will attract high- quality employees . Employees should also be trained to do the job, and their work should be adequately supervised. Assignment of Responsibilities In a business with good internal controls, no duty is overlooked. Each employee has certain, carefully defined responsibilities. For example, in a large company, the person in charge of signing checks is called the treasurer. The chief accounting officer is called the controller. Even an entry-le ! bookkeeper, whose job includes recording accounting transactions accurately, has clear consibilities. This assignment of responsibilities creates job accountability, thus ensuring important tasks get done. Separa 10 of Duties Smart management policies divide responsibilities between two or more people. Separation of dutie Imits fraud and promotes the accuracy of the accounting records. Separation of duties can be divided into two parts: 1. Separating operations from accounting. Accounting should be completely separate from the operating departments, such as production and sales. What would happen if sales personnel recorded the company's revenue? Sales figures could be inflated, and then top managers would not know how much the company actually sold. 2. Separating the custody of assets from accounting. Accountants must not handle cash, and cashiers must not have access to the accounting records. If one employee has both duties, that employee could steal cash and conceal the theft in the accounting records. The treasurer of a company handles cash, and the controller accounts for the cash. Neither person has both responsibilities. This control applies to all assets, not just cash. a company's both internal and external audits. Remember that an audit is an examination of To assess the adequacy and accuracy of their accounting records, most companies perform financial statements and accounting system by a trained accounting professional called an auditor. Internal audits are performed by employees of the company. External audits are To evaluate the accounting system, auditors must examine the internal controls and test them to ensure the controls are working properly. For example, a control might require of payments greater than $50 to determine whether all payments were properly authorized Audits performed by independent auditors who are not employees of the company. by a manager Documents be Documents provide the details of business transactions and include invoices and orders which may paper or electronic. Documents should be prenumbered to prevent theft and inefficiency. A gap in the numbered sequence draws attention. For example, for Smart Touch Learning, a key document is the sales invoice. The man ager can compare the total cash sales on the invoices with the amount of cash received and deposited into the bank account. Electronic Devices Accounting systems are relying less on paper documents and more on electronic docu- ments and digital storage devices. For example, retailers control inventory by attaching an electronic sensor to merchandise. The cashier removes the sensor after a sale is made. If a customer tries to leave the store with the sensor attached, an alarm sounds. Devices such as these can significantly reduce theft. E-Commerce E-commerce creates its own unique types of risks. Hackers may gain access to confidential information, such as account numbers and passwords, or introduce computer viruses, Trojans, or phishing expeditions. To address the risks posed by e-commerce, companies have devised a number of security measures. One technique for protecting customer data is encryption Encryption rearranges plain-text messages by a mathematical process. The encrypted mes- sage cannot be read by those who do not know the code. An accounting encryption example uses check-sum digits for account numbers. Each account number has its last digit equal to the sum of the previous digits. For example, consider customer number 2237, where 2 + 2 + 3 = 7. Any account number failing this test triggers an error message. Another technique for protecting data is firewalls. Firewalls limit access into a local network. Members can access the network, but nonmembers cannot. Usually several firewalls are built into the system. At the point of entry, additional security measures, such as passwords, PINs (personal identification numbers), and signatures are used. For additional security, more sophisticated firewalls are used deeper in the network to protect more sensitive data
