cash, by: weygandt kimmel kieso

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cash, by: weygandt, kimmel, and kieso

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  • 1. Slide 7-1
  • 2. Slide 7-2 Chapter 7 Fraud, Internal Control, and Cash Financial Accounting, IFRS Edition Weygandt Kimmel Kieso
  • 3. Slide 7-3 Study Objectives 1. Define fraud and internal control. 2. Identify the principles of internal control activities. 3. Explain the applications of internal control principles to cash receipts. 4. Explain the applications of internal control principles to cash disbursements. 5. Describe the operation of a petty cash fund. 6. Indicate the control features of a bank account. 7. Prepare a bank reconciliation. 8. Explain the reporting of cash.
  • 4. Slide 7-4 Fraud Internal control Principles of internal control activities Limitations Cash equivalents Restricted cash Compensating balances Fraud, Internal Control, and Cash Making deposits Writing checks Bank statements Reconciling the bank account Electronic funds transfer (EFT) system Over-the-counter receipts Mail receipts Fraud and Internal Control Cash Receipts Controls Control Features: Use of a Bank Reporting Cash Cash Disbursement Controls Voucher system controls Petty cash fund controls
  • 5. Slide 7-5 Fraud and Internal Control Fraud Dishonest act by an employee that results in personal benefit to the employee at a cost to the employer. SO 1 Define fraud and internal control. Why does fraud occur? Illustration 7-1
  • 6. Answer on notes page Slide 7-6
  • 7. Slide 7-7 Fraud and Internal Control Methods and measures adopted to: 1. Safeguard assets. 2. Enhance accuracy and reliability of accounting records. 3. Increase efficiency of operations, and 4. Ensure compliance with laws and regulations. SO 1 Define fraud and internal control. Internal Control
  • 8. Slide 7-8 Fraud and Internal Control Internal control systems have five primary components A control environment Risk assessment Control activities Information and communication Monitoring SO 1 Define fraud and internal control. Internal Control
  • 9. Slide 7-9 Fraud and Internal Control Principles of Internal Control Activities Measures vary with managements assessment of the risks faced. size and nature of the company. Six principles of controls activities: Establishment of responsibility Segregation of duties Documentation procedures Physical controls Independent internal verification Human resource controls SO 2 Identify the principles of internal control activities.
  • 10. Slide 7-10 Fraud and Internal Control Principles of Internal Control Activities ESTABLISHMENT OF RESPONSIBILITY Control is most effective when only one person is responsible for a given task. SEGREGATON OF DUTIES Related duties, including physical custody and record keeping, should be assigned to different individuals. DOCUMENTATION PROCEDURES Companies should use prenumbered documents and all documents should be accounted for. SO 2 Identify the principles of internal control activities.
  • 11. Fraud and Internal Control Slide 7-11 SO 2
  • 12. Slide 7-12 Fraud and Internal Control SO 2 Identify the principles of internal control activities.
  • 13. Fraud and Internal Control Slide 7-13 SO 2
  • 14. Slide 7-14 Fraud and Internal Control Principles of Internal Control Activities PHYSICAL CONTROLS Illustration 7-2 SO 2 Identify the principles of internal control activities.
  • 15. Slide 7-15 Fraud and Internal Control INDEPENDENT INTERNAL VERIFICATION 1. Verify records periodically or on a surprise basis. 2. Verify records by an employee who is independent. 3. Discrepancies reported to management. Illustration 7-3 Principles of Internal Control Activities SO 2 Identify the principles of internal control activities.
  • 16. Slide 7-16 Fraud and Internal Control Principles of Internal Control Activities HUMAN RESOURCE CONTROLS 1. Bond employees. 2. Rotate employees duties and require vacations. 3. Conduct background checks. SO 2 Identify the principles of internal control activities.
  • 17. Fraud and Internal Control Slide 7-17 SO 2
  • 18. Slide 7-18 Fraud and Internal Control SO 2
  • 19. Slide 7-19 Fraud and Internal Control SO 2
  • 20. Slide 7-20 Answer on notes page
  • 21. Slide 7-21 Fraud and Internal Control Limitations of Internal Control Costs should not exceed benefit. Human element. Size of the business. SO 2 Identify the principles of internal control activities.
  • 22. Slide 7-22 Illustration 7-4 Independent Internal Verification Supervisors count cash receipts daily; treasurer compares total receipts to bank deposits daily Cash Receipts Controls Over-the-Counter Receipts Establishment of Responsibility Only designated personnel are authorized to handle cash receipts (cashiers) Segregation of Duties Different individuals receive cash, record cash receipts, and hold the cash Documentation Procedures Use remittance advice (mail receipts), cash register tapes, and deposit slips Physical Controls Store cash in safes and bank vaults; limit access to storage areas; use cash registers Human Resource Controls Bond personnel who handle cash; require employees to take vacations; deposit all cash in bank daily SO 3 Explain the applications of internal control principles to cash receipts.
  • 23. Slide 7-23 Cash Receipts Controls Cash consists of coins, currency, checks, money orders, and money on hand or on deposit in a bank. Cash receipts come from: cash sales collections on account from customers receipt of interest, rent, and dividends investments by owners bank loans proceeds from the sale of noncurrent assets SO 3 Explain the applications of internal control principles to cash receipts.
  • 24. Over-the- Counter Receipts Slide 7-24 Illustration 7-5 SO 3 Explain the applications of internal control principles to cash receipts.
  • 25. Slide 7-25 Cash Receipts Controls Mail Receipts Mail receipts should be opened by two people, a list prepared, and each check endorsed. Copy of the list, along with the checks and remittance advices, sent to cashiers department. Cashier adds the checks to the over-the-counter receipts, prepares a daily cash summary and makes the daily bank deposit. Copy of list sent to treasurers office for comparison with total shown on daily cash summary. SO 3 Explain the applications of interna

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