1. List some reasons why the Bank statement balance may differ from the company checkbook balance. 2....

1. List some reasons why the Bank statement balance may differ from the company checkbook balance.

2. Discuss how employers should enact procedures for internal control for the most risky activities.

Solutions

Expert Solution

1) The Bank statement balance may differ from the company checkbook balance for some following reasons:

Cheques issued by the Company have not been presented by the receiving party to the bank
Cheques received by the Company not deposited or deposited at the end of the day of end of the month.
A check that was not honored by the bank of the entity issuing the check, on the grounds that the entity's bank account does not contain sufficient funds
a banking transaction, such as a credit received, or a charge made by the bank, has not yet been recorded in the organization's books
either the bank or the organization itself has made an error.

The above has to be reconciled by preparing the Bank Reconciliation Statement.

2) There are five basic elements that lead to a good system of internal control.

Control Environment. Any good system of internal controls must begin with the control environment, particularly the top level management. You must make it clear to employees, investors, vendors and customers that the company will be run honestly and ethically and deviations from this policy will not be tolerated.
Risk Assessment. Once a proper tone is established, you should then perform a risk assessment. You want to assess the areas where there is the greatest risk that your organization will not be successful.
Control Activities. Once risk has been assessed, institute policies and procedures that mitigate those risks. A system of internal controls must be designed specifically to address the greatest areas of risk, whether the risk is the occurrence of fraud or error. Activities that mitigate risk include segregation of duties, safeguarding of assets and policies related to information processing.
Monitoring. Monitoring of the internal control system may include internal audits, testing of procedures, follow up on errors and reaction to perceived deficiencies.
Communication. Finally, there must be clear communication of information. Provide all levels of employees with the information that they need to properly carry out the activities of the organization and adhere to the developed controls.

ekkarill92 answered 9 months ago

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