Question

Your friend, Aisha, plans to open a parking garage business. Aisha states that she does not have time to develop and implement a system of internal controls. (a) Explain to Aisha the objectives of a system of internal control. (10 points) (b) Explain to Aisha at least 3 internal controls that she might consider implementing to protect her business against fraud. (15 points)

Answer 1

(a) Explain to Aisha the objectives of a system of internal control.

Answer:-

Defend the advantages of his business. On the off chance that there is arrangement of inward control, burglary of benefits or abuse of any advantage by a worker for his own need (say a vehicle having a place with the business) can be maintained a strategic distance from.

Securing the business against extortion. Inside control frameworks will have the capacity to counteract and recognize misrepresentation like misappropriation, robbery of money and property, false advantage guarantee, finance padding.It won't be feasible for one individual to check everything. Foundation of an inward control framework with governing rules and isolation of obligations will guarantee aversion and location of extortion.

Efficiency and effectiveness of operations: A system of internal control ensures that business is carried out in orderly manner with efficiency. This will help the business to make profits and grow.

System of internal control will ensure that accounting records are complete and accurate. This will help him inobtain correct information about his business and financial status from time to time.

For lawful reason business needs auspicious readiness of budgetary data. Inner control frameworks will help in achieving this goal. It will likewise help in guaranteeing consistence with laws.

(b) Explain to Aisha at least 3 internal controls that she might consider implementing to protect her business against fraud.

Answer:-

Isolation of obligations: Checks and equalizations with the goal that a solitary individual does not have authority over all parts of a budgetary exchange. For instance the elements of receipt of money, deposting in bank , record keeping ought not be finished by a similar individual

Occasional (in any event once in multi month) bank compromise by a free individual ( by an individual who does not keeps up records or signs checks)is a critical inside control for anticipating cheats.

Ensure that there is periodic check on use of assets of business like vehicles, mobile phones etc

Periodic physical check of inventory will ensure prevention and detection of theft of inventory

Periodic physical check of fixed assets will ensure prevention and detection of theft of fixed assets and it will also ensure proper maintenance of assets

Intermittent check of money adjusts and insignificant money will forestall money misrepresentation

Legitimate command over check books, accepting and saving checks will avert extortion of checks

Building up an arrangement of inside reviews will guarantee execution of inward control frameworks

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