Identify the principles of internal control. Explain the use of cash and internal controls to prevent...

Identify the principles of internal control.
Explain the use of cash and internal controls to prevent fraud.
Explain why corporations invest in stocks and debt securities.
Describe how debt and stock investments are reported in financial statements.
Evaluate the effects of unusual or irregular items on financial statements.

Expert Solution

1- principles of internal control.-

Responsibilities for Internal Control

.Record Keeping Procedures.

Insurance and Bonding.

Asset Records and Custody

.Responsibility for Related Transactions.

Technological Internal Controls.

Independent Review of Internal Control Activities and Systems.

2-use of cash and internal controls to prevent fraud.

There should be a seperate cashier to deal with the receipt of cash.when cash is received,it should be recorded in a rough cash book or in the cash diary before entering to formal statement.The remittance like cheque draft etc must be opened by a resposible person and do further proceedings.All cheque ,draft received should crossed with "not negotiable account payee" in order to reduce fraud.All receipts should be in printed form and unusual receipts should be kept in safe custody.All receipts should be banked daily,try to use internal control system computerised form for ensuring high safety.

3-why corporations invest in stocks and debt securities.

these debt and equity can be sold at any time in the stock market when needed.they will get high rate of return from those investment.In order to gain operating leverage also,the companies will invest in other corporates.Holding most of the shares of a aprticular company will make the the company as a subsidiary company of the purchasing company

4- how debt and stock investments are reported in financial statements.

These are shown in balance sheet,if the investment is short term nature,then it comes under current asset as trading securities,and if it is long term,then will comes under long term investment.

5-effects of unusual or irregular items on financial statements

Unusual or irregular items should be recorded in the financial statement.so it will reduce the cash inflow and negatively affects the equity also.These items are material facts on the financial statement

ekkarill92 answered 2 years ago

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