Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 7 - Fraud, Internal Control, and Cash - Questions: 12

Answer

The Management of the company can be advised as follows: 1) The internal control is designed to provide reasonable assurance of proper safeguarding the assets and reliability of accounting records. 2) The human factor is very important factor in any internal control system.

Work Step by Step

1) The meaning of reasonable assurance differs as per the size and requirements of the company. The cost of installing an internal control system should not be more than the benefits expected from it. 2) Take any activity of the company, and if the employee is careless, fatigue or indifferent, the system will become ineffective. In a store, whenever a material is received, the receipt executive is supposed to check the quantity and quality of the material. If the receipt executive, is careless or indifferent, and don't carry out the proper counting / check, the system will become ineffective.
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