internal control with questions

What is the primary purpose of internal control?

To protect assets, prevent fraud, and ensure operational efficiency.

What are the two types of internal controls?

Administrative Controls and Accounting Controls.

What is one principle of internal control?

Ensure reliable accounting information.

Name a limitation of internal control.

Collusion.

How does separation of duties function as an internal control?

Prevents one person from managing all aspects of a transaction, reducing fraud risk.

What strategy helps safeguard cash from theft or loss?

Separate cash handling from recording.

What is a strategy used in accounts payable to ensure proper creditor payments?

Match invoices to purchase orders or delivery notes.

What is one strategy related to accounts receivable?

Send monthly statements to debtors.

Name a strategy to manage inventory efficiently.

Use security measures like cameras and guards.

Why must internal controls be regularly reviewed?

To ensure they remain effective and up to date.

What are two strategies to control accounts receivable designed to ensure reliable debts?

Credit checks and imposing credit limits.

How does daily banking improve internal control?

It reduces on-site cash, thereby lowering the risk of theft.

What role do approval processes play in internal control?

They ensure that purchases are necessary and authorized.

What can low staff numbers hinder in internal controls?

It can make it difficult to segregate duties.

What is an example of an accounting control?

Invoice verification.

What can be a consequence of human error in internal control?

Mistakes can render controls ineffective.

Why might a business avoid implementing all possible internal controls?

Due to high costs or potential operational inefficiency.

What is the purpose of using bank transfers for payments in internal control?

To enhance security and record-keeping.