Internal control and GAAP

Internal Control

Processes and procedures implemented to limit theft and ensure compliance with expected conduct.

Preventative Control

Control measures designed to stop undesirable events from occurring.

Detective Control

Control mechanisms that alert management to undesirable events after they have occurred.

Corrective Control

Measures taken to rectify issues that have already arisen.

Directive Control

Controls that encourage desirable behaviors or discourage negative actions.

Segregation of Duties

A key internal control principle that distributes responsibilities among different people to enhance accountability.

Proper Authorization

The requirement that all financial decisions, especially those involving significant amounts, be approved by senior management.

Controls Over Information Processes

Systems ensuring that all source documents are tracked and accounted for through pre-numbering.

Management Policies

Rules and guidelines set by management to govern behavior and processes within an organization.

GAAP

Generally Accepted Accounting Principles, the standard framework of guidelines for financial accounting.

Historic Cost Concept

Accounting principle that requires assets to be recorded at their purchase price rather than current value.

Prudence Concept

Financial reporting should be done in the most conservative manner to avoid overstating financial performance.

Materiality Concept

Only significant information should be separately identified in financial statements, while trivial information may be aggregated.

Business Entity Concept

A business's financial affairs should be kept separate from those of its owners.

Going Concern Concept

Financial statements should be prepared with the assumption that the business will continue to operate indefinitely.

Accrual Matching Concept

The principle where income and expenses should be matched in the same accounting period in which they occur.