Internal control 1

What is the primary purpose of internal control systems in an organization?

To enhance efficiency, ensure reliability of accounting records, and safeguard assets.

What is one key principle of internal control?

Ensure accounting information reliability.

What is a limitation of internal controls related to employee behavior?

Collusion allows employees to bypass controls together.

What strategy can be used to prevent theft and loss of cash?

Separate cash handling from recording.

Why is it important to have senior approval for payments?

To prevent unauthorized disbursements and ensure accountability.

What strategy can improve the reliability of debt collection?

Sending monthly statements to customers to verify accuracy and prompt payment.

What is the purpose of accounts payable controls?

To ensure timely payments and maintain good supplier relationships.

What security measures can safeguard non-current assets?

Using cameras and guards for security.

How can inventory theft be prevented?

By implementing secure storage practices, such as locked warehouses.

What distinguishes administrative controls from accounting controls?

Administrative controls focus on duty segregation and secure asset storage; accounting controls involve financial transaction verification and reporting.

What is the importance of separation of duties in internal controls?

It prevents fraud by dividing responsibilities among employees.

Why is regular review essential for internal controls?

To update controls and address new risks.

What method can minimize waste in inventory management?

Using the FIFO (First In, First Out) method.