Question

Assignment Question(s):                                                                  

Q1-

A company wants to implement good internal control. What are the policies and procedures you can suggest to minimize human frauds and errors? (1Mark)

Q2-

Assume that you have a company. And the management team estimates that 3% of sales will be uncollectible.

Give any amount of sales and prepare the journal entry using the percent of sales method. (1Mark)

Q3-

A company that uses a perpetual inventory system made the following cash purchases and sales. There was no beginning inventory.

January 1:	Purchased 30 units at SAR11 per unit
February 5:	Purchased 30 units at SAR 13 per unit
March 16:	Sold 50 Units for SAR 15 per unit

A. Prepare general journal entries to record the March 16 sale using the

1. FIFO inventory valuation method.
2. LIFO inventory valuation method.
3. Weighted average valuation method.

B. What is the cost of goods sold and the gross margin for each method? (2Marks)

Q4. What is the bank reconciliation? why is it important for companies to prepare bank reconciliation periodically? (1Mark)

Answer 1

Internal controls play an essential role in every company's success, yet many business owners don't have a clear understanding of what they are or why they are important. Internal control should be both effective and efficient for every organisations. It is essential for a company's management team to carefully design an internal control structure that addresses the risks to the organization without burdening it with unnecessary costs and effort.

What is Internal Control?

Internal controls provide assurance about achieveing objectives regarding:

• Effectiveness and efficiency of operations.
• Reliability of financial reporting.
• Safeguarding of assets.
• Compliance with applicable laws and regulations.

Fraud Prevention Points:

1. Know Your Employees: Behaviour of employees regarding their work and colleagues indicate the intention to commit farud. Observing and listening to the employees can help us identify potential farud risk. It is important for management to be involved with their employees and take time to get to know them. For Example: if an employee feels a lack of appreciation from the business owner or anger at their boss, this could lead him or her to commit fraud as a way of revenge. So every management should pay close attention to their employees. This will help to reduce the frauds.
2. Implement Intenrnal Controls: Internal Controls are plans implemented to safeguard your company's assets, ensure the integrity of its accounting records and detect fraud and theft. Internal control programs should be monitored and revised on a consisitent basis to ensure they are effective and current with technological and other advances. If company do not have an internal control process or fraud prevention program in place, then company should hire a professional with experience in this area. That professional will analyze the company's policies and procedures, recommend appropriate programs and assist with implementations.   
3. Corporate Culture: A positive work environment can prevent employee farud and theft. There should be a clear organizational structure, written policies and procedures and fair employment practices. An open-door policies can also provide a great fraud prevention system as it give employees freedom to communicate with management. Business owners and Senior Managers play important role in work environment.

Minimize the Risk of Error: Errors in a company's accounting records can damage relationships with customers, vendors and employees and ultimately result in loss of income. Properly designed internal controls should help your company prevent or identify errors. Automation of processes and controls and proper levels of review can prevent errors from entering into system of company.