Question

List the components of the framework commonly used in corporations when analyzing their internal control systems:

1.)

2.)

3.)

4.)

5.)

List the five common principles of Internal Control and give an explanation and example of each

1.)

2.)

3.)

4.)

5.)

What are the two basic reasons that a company’s cash records do not balance to the bank statement?

1.)

2.)

Answer 1

List of the components of the framework commonly used in corporations when analyzing their internal control systems:

1.) Control enviroment

2.) Risk assesment

3.) Control analysis

4.) Information and communication

5.) Monitoring

List the five common principles of Internal Control and give an explanation and example of each

1.) Establish responsibility: Assignment of responsibility to each and every employees with one task.

Example- In an organiztion there is marketing dept. It includes both marketing and selling so, responsibility must asssign on different emloyees

2.) Segregate duties: The work of the organization must be divided on diferent basis. Such segregation must be on specilization. it means one emloyee shouldn't assign entire process of activites.

Example: Recording and record keeping functions are separate from the actual handling of cash.

3.) Restrict access: Do not provide or disclose the material or immaterial facts relating to assets or information unless it is actually needed and it must be authoritative.

Example- such as;, computer software passwords, blank checks, company letterhead and signature stamps

4.) Document procedures: Those activits which are occured must be recorded and presented

Example- Payment made tosupplies through the checks and the check number must be recorded

5.) Independently Review: Review the facts and figure which are recorded in books of accounts and ensure proper compliance of rules and regulations.

Example:Cash balance in accounting year compare with same years bank balance.

There are two basic reasons that a company’s cash records do not balance to the bank balance

1.) Cheques issued but not presented for payment

2.) Direct payment by bank on trader's behalf