Question

Fraud is intentional deceit or trickery that results in a misstatement of the financial statements. Management is responsible for taking steps to reduce the risk of fraud. After quite a few instances of fraud in many large, publicly owned companies in recent years, a number of accounting reforms have been instituted to safeguard against fraud. One major change was the Sarbanes-Oxley Act (SOX) of 2002.

SOX included a set of reforms that toughened penalties for corporate fraud, restricted the types of consulting that CPAs can perform for audit clients, and created the Public Company Accounting Oversight Board (PCAOB). SOX requires publicly traded companies to follow government policies and procedures.

Since cash is the most liquid of all assets, it needs to be safeguarded. Both large and small companies are susceptible to fraud and other unethical activities without proper controls in place. Managers and business owners can protect against fraud by using an internal control system to protect their assets. An effective control system can also help businesses to conduct reliable accounting, operate efficiently, and encourage employees to follow company policies.

To ensure that the internal controls implemented around cash are designed properly, there should be a segregation of duties:

• Recordkeeping
• Custody
• Authorization
• Reconciliation

In an ideal situation, there should be one individual assigned the responsibility of only one component. The record keeping function of an asset should be separated from the custody of an asset. In addition, the individual responsible for authorizing a transaction related to cash should not be the same person that has custody of that cash or performs the recordkeeping. Furthermore, reconciliations should be completed by different individuals to ensure that the internal controls are working effectively. This includes doing physical audits, checks, and reviews of internal control procedures that are in place to catch errors in time and to avoid fraud.

• Identify the type of company you own and briefly describe the nature of your business. Perhaps you sell shoes, clothing, furniture, or computers. You might own a restaurant or a small drug store or small walk-in health clinic.
• Identify at least two kinds of internal control procedures that you can implement to protect your cash.
  • How would you protect the inventory in your warehouse?
  • How would you protect the cash in your cash register?
  • How would you protect your electronic data, such as banking information?
• How can internal controls help to protect these assets?
• How can you use technology to implement an effective internal control system to help your business? Explain your answers.

Answer 1

Answer 1 :

I have a business which is a small restaurant. Here I hire 4 people in total. Of course I would need a cook and a waiter to serve the tables. Other than that I would require a cashier at the counter and an external auditor as well.

Answer 2 :

Once this sanction is given the cashier gives the cook the money to purchase the inputs for the restaurant. However it is the waiter who actually purchases the products from the market using the money and the list of purchases given by the cook. This ensures that all the people share a responsibility which is distinct and there is no overlap. Hence in case of any mismanagement of money one can straight away point out where things have gone wrong.

Answer 3 :

The design of your stockroom ought to encourage sensible stock stream, from getting and assessment through to picking and pressing, to guarantee that tasks move rapidly and easily. A confined, clogged format makes it hard for stock administration staff to get to stock and leaves inadequate space for significant procedures, for example, accepting, which expands the danger of human mistake. It's particularly critical to reexamine your distribution center format to oblige increments in organization deals, which add to expanded space necessities.

Answer 4 :

To protect the cash in the register I have the cashier system where the register opens only when bill is to be paid. Only the cashier is responsible for this. Hence any missing cash can be easily traced.

Answer 5 :

Web based financial gives you command over your budgetary life at the dash of a catch, be that as it may, similarly as with whatever else on the web, there are dangers with regards to security. That shouldn't shield you from utilizing on the web and versatile banking, however it implies you'll should be cautious about how you approach it. That is the place the measures sketched out here can help.

Likewise, make sure to stay aware of fundamental security housekeeping obligations for your gadgets. Introduce firewall security on your PC or cell phone on the off chance that you haven't done that yet. Utilize a secret word to bolt your PC and exploit facial acknowledgment or unique mark locking on your telephone. Finally, keep your working frameworks refreshed. By being proactive with overseeing security dangers, you can help decline the chances of your web based financial data winding up in an inappropriate hands.

Answer 6 :

Internal controls are a progression of approaches and methodology that an entrepreneur sets up for the accompanying purposes:

• Securing resources: internal controls shield resources from unintentional misfortune or misfortune from extortion.
• Looking after dependability: internal controls ensure that administration has exact, ideal, and complete data.
• Guaranteeing consistence: internal controls keep accounts in consistence with the numerous government, state, and neighborhood laws and guidelines influencing the tasks of an organization.
• Advancing proficient tasks: internal controls make a domain where chiefs and staff can expand productivity and adequacy.
• Achieving destinations: internal controls give an instrument to the executives to screen the accomplishment of operational objectives and goals.

The obligation regarding keeping up internal controls falls on regulatory administration. Individuals from the supervisory crew are liable for imparting to staff their obligations and desires inside an internal control condition. They are additionally responsible for guaranteeing that different regions of the internal control system are managed reliably.

Answer 7 :

Technology so far as I would ideally like is a blockchain based system where every entry is logged in and shared on all the nodes so that all the cash and it's usage can be easily traced.

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