English

ACCT 4304

Exam II Review Sheet

Internal controls

refers to systematic measures instituted by an organization to conduct its business in orderly and efficient manner, safeguard its assets and resources, deter and detect errors, fraud and theft, ensure accuracy and completeness of its accounting data, produce reliable and timely financial and management information and ensure adherence to its polices and plans.

-Management has the responsibility to implement and maintain internal controls, the auditor will only test those controls to see if they are working or not.

-Passwords is one of the most common controls in computers

* Know the types of controls (preventive, detective, corrective, )

* Preventive, aimed at avoiding the occurrence of misstatements.

* voided payroll checks properly mutilated and retained

* dual signatures for checks

* supervisory approval on time cards

* segregation of duties in effect

* use of pre-numbered purchase orders

* The use of passwords

* Detective, designed to discover misstatements after they have occurred

* Annual physical inventory

* Monthly reconciliation of bank accounts

* Internal auditors of payroll

* Management review of budget/actual information

* Corrective, needed to remedy the situation

* Adjustment of perpetual inventory records to physical counts

* Complementary, controls that function together to achieve the same control objective.

* Compensatory, reduce tusk that existing or potential control weakness will result in material misstatement.

* Know the different control activities

1. Performance review, controls that independently check the performance of the individuals or process in the system, ie, senior management should review actual performance VS budgets, forecast, prior periods, and competitors.

2. Information processing controls, controls that are performed to check accuracy, completeness, and authorization of...