Internal Control and Cash

These flashcards cover key concepts related to internal control systems and cash management as outlined in the lecture notes.

Internal Control

A system adopted within a company to help achieve reliable financial reporting, effective operations, and compliance with laws, while preventing errors and fraud.

Control Environment

The overall atmosphere in which internal controls operate, shaped by the governance, culture, and structure of the organization.

Risk Assessment

The identification and analysis of relevant risks to achieving the organization's objectives.

Control Activities

Specific policies and procedures that help ensure management directives are carried out.

Segregation of Duties

The division of responsibilities among different individuals to reduce the risk of error or inappropriate actions.

Documentation

Evidence that transactions have occurred at specified times and amounts.

Physical Controls

Measures taken to safeguard assets and enhance record accuracy, such as security systems and locks.

Review and Reconciliation

The process of comparing records to verify accuracy and completeness, including bank reconciliations.

Fraud

An intentional act to misappropriate assets or misstate financial information.

Bank Reconciliation

The process of matching the cash balance in the company's books to the balance in the bank statement.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to cash.

Outstanding Cheques

Cheques that have been written but not yet cleared by the bank.

Deposits in Transit

Deposits that have been recorded by the company but not yet processed by the bank.

NSF Cheque

A cheque that cannot be processed due to insufficient funds in the account.

Internal Control Limitations

Factors such as cost considerations, human error, collusion, and management override that may affect the effectiveness of internal controls.

Cash Receipts

Cash inflows from various sources, which must be controlled effectively to prevent theft or errors.

Cash Payments

Outflows of cash, which are more secure when processed by cheque or electronic funds transfer.