⋆.𐙚 ̊ accounting [chapter five]: fraud and internal control

fraud

when someone cheats or lies on purpose to get money or benefits that don’t belong to them

three things that make fraud happen

1. opportunity

2. financial pressure

3. rationalization

internal control

company rules to protect assets

what do internal controls help ensure?

1. protect assets

2. make sure records are correct

3. keep work running smoothly

4. follow laws

five parts of internal control

1. control environment

2. risk assessment

3. control activities

4. information and communication

5. monitoring 

principles of internal control activities

1. segregation of duties

2. documentation procedures

3. physical controls

4. independent internal verification

5. human resource controls

independent internal verification

someone else double-checks the work

examples of human resource controls

background checks, forces vacations, rotating jobs

data analytics and internal controls

using computures and data tools to spot weird patterns that may show fraud

limits of internal control

• controls can cost too much (don’t spend 100 to protect 10)

• human error

• small businesses might not have enough workers for all rules

how to companies protect things that are more risk?

to protect items that are more at risk, like cash, companies usually implement stricter rules