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Internal Controls for Accounting Students

This document provides examples of internal controls that can be implemented within an organization. Some of the key internal controls mentioned include adequate documentation of processes, performing background checks for employees in sensitive roles, daily backups of computer files and power supplies to prevent data loss, bank reconciliations to account for timing differences and detect errors, use of control totals and document matching to ensure accurate payment of invoices, use of firewalls and encryption to protect accounting information systems from unauthorized access, and segregation of duties so that no single person has control over key financial functions. Regular internal audits can also help strengthen internal controls by revealing any fraud, waste or inefficiencies.

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Louie Jay Junio
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127 views21 pages

Internal Controls for Accounting Students

This document provides examples of internal controls that can be implemented within an organization. Some of the key internal controls mentioned include adequate documentation of processes, performing background checks for employees in sensitive roles, daily backups of computer files and power supplies to prevent data loss, bank reconciliations to account for timing differences and detect errors, use of control totals and document matching to ensure accurate payment of invoices, use of firewalls and encryption to protect accounting information systems from unauthorized access, and segregation of duties so that no single person has control over key financial functions. Regular internal audits can also help strengthen internal controls by revealing any fraud, waste or inefficiencies.

Uploaded by

Louie Jay Junio
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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INTERNAL CONTROL EXAMPLES

LOUIE JAY E. JUNIO


BSA 3-8
Adequate Documentation

Process Documentation- can help you critique


internal controls and determine if they are
functioning effectively
Background Checks

Particularly for employees in sensitive


positions, such as those who deal with
large amounts of money.
Backup of computer files

Daily backups ensure that no more


than one day’s work is lost in an
event of systems failure.
Backup of Power Supplies

The backup supply can give the user time


to save any open files, ensuring they are
not lost.
Bank Reconciliation

The basic purpose of a bank reconciliation


is to account for timing difference it can
also be helpful in spotting out-of-
sequence checks, fraudulent signatures,
and errors in the information system.
Batch Control totals

Control totals may be “meaningful”, in the


sense that they may have a use (for instance to
an auditor) that is additional to their function
within the system.
Data Encryption

Without it, hackers and other computer


criminals can easily access, change, and/or
steal data, compromising data integrity and
privacy throughout the accounting information
system.
Document Matching

Document matching helps ensure that vendor


invoices are only paid when merchandise has
been properly ordered and invoice.
Echo checks

The information system ‘’echoes’’ the data


you’ve entered back to you before it completes
final processing.
Firewalls

They can prevent unauthorized intrusions into


an accounting information system and warn
users when such intrusion is detected.
Insurance and Bonding

While insurance and bonding cannot prevent


internal control breaches, they can help
organizations correct any financial losses they
experience as a result.
Internal Audits

Internal Audits can reveal indications of fraud,


waste and inefficiency, thus strengthening
internal control.
Limit Checks

A limit check can ensure that the manager


doesn’t violate the limit for specific
transaction.
Lockbox systems

Rather than remitting payment directly to an


organization, customer send their payment to a
lockbox.
Physical Security

Simple actions such as locking doors and


securing computers and related equipment can
go a long way in safeguarding assets.
Preformatted data entry screens
Remember that one of the purpose of internal
control is promoting operating efficiency.
Pre-numbered Documents

A seriously out-of-sequence document can be a


warning sign for internal control breaches
and/or fraud.
Restrictive Endorsement and daily
deposits of checks received
Blank endorsement which means ‘’your
signature alone’’

Restrictive endorsements give the bank more


specific instructions that limit the uses of the
ensorsed check; the most common is ‘’for
deposit only’’
Segregation of duties

Segregation of duties means that to the extent


possible, three different people should each
take on one responsibility to a specific asset:
-authorization for use
-physical custody
-record keeping
User Training

All internal control processes in the world are


virtually worthless if people don’t know how to
apply them.

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