Lecture International accounting: Chapter 6 - Nguyễn Quốc Nhất

Lecture "International accounting - Chapter 6: Internal control and cash" has content: Internal control, the sarbanes - oxleyact (SOX), the components of internal control, internal controls for e commerce, the bank account as a control device, the bank reconciliation,... and other contrens.
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Lecture International accounting: Chapter 6 - Nguyễn Quốc NhấtInternational Financial AccountingCHAPTER 6: INTERNAL CONTROLAND CASHLOGOLearning of objective:•Define internal control and explain why it is needed.•Explain the common principles and limitations of internalcontrol.•Describe the operation of voucher and petty cash systems.•Prepare a bank reconciliation.•International Accounting of FinancialApply internal control principles to cash receipts and payments.•Describe the reporting of cash and cash equivalents.MA. Nguyen Quoc NhatINTERNAL CONTROL AND CASH26.1 INTERNAL CONTROLDefinitionIn business, internal control is defined as the methodsan organization uses to protect against the theft of assets,enhance the reliability of accounting information, promoteefficient and effective operations, and ensure compliance withapplicable laws, regulations, and codes of ethical conduct.Table of content6.1 Internal Control6.2 The Sarbanes-Oxley Act (SOX)6.3 The Components of Internal Control6.4 Internal Controls for E-Commerce6.5 The Bank Account as a Control Device6.6 The Bank Reconciliation6.7 Internal Control over Cash Receipts6.8 Internal Control over Cash Payments6.9 The Petty Cash Fund6.10 Ethics and AccountingINTERNAL CONTROL AND CASH36.2 THE SARBANES-OXLEY ACT (SOX)46.3 THE COMPONENTS OF INTERNAL CONTROLAlthough internal control is essential to businesses ofall sizes, it has become one of the most important issues facingpublic companies today. The first decade of this centurybrought several high-profile accounting scandals involvingEnron, WorldCom, and a number of other publicly ownedcompanies. To restore investor confidence and improve thequality of financial reporting in the United States, the U.S.Congress passed the Sarbanes-Oxley (SOX) Act of 2002 .This new act has led public companies to strengthen theirinternal controls and to better inform financial statement usersof their effectiveness in producing accurate financialstatements and preventing fraud.INTERNAL CONTROL AND CASHINTERNAL CONTROL AND CASH5MA. Nguyen Quoc Nhat- nhatnq.faa@gmail.comA business can achieve its internal controlobjectives by applying five components.● Monitoring of controls● Information system● Control procedures● Control Environment● Risk assessmentINTERNAL CONTROL AND CASH61International Financial AccountingCHAPTER 6: INTERNAL CONTROLAND CASH6.3 THE COMPONENTS OF INTERNAL CONTROL6.3 THE COMPONENTS OF INTERNAL CONTROLMonitoring of ControlsCompanies hire auditors to monitor their controls.Internal auditors are employees of the businesswho ensure that the company’s employees are followingcompany, policies and that operations are runningefficiently. Internal auditors also determine whether thecompany is following legal requirements to monitorinternal controls to safeguard assets.INTERNAL CONTROL AND CASHInformation SystemAs we have seen, the information system is critical.Controls must be in place within the information systemto ensure that only authorized users have access to variousparts of the accounting information system. Additionally,controls must be in place toinsure adequate approvals for recorded transactions are inplace. The decision makersneed accurate information to keep track of assets andmeasure profits and losses.76.3 THE COMPONENTS OF INTERNAL CONTROLControl EnvironmentThe control environment is the “tone at the top” of thebusiness. It starts with the owneror CEO and the top managers. They must behavehonorably to set a good example forcompany employees. Each must demonstrate theimportance of internal controls if he orshe expects the employees to take the controls seriously96.3 THE COMPONENTS OF INTERNAL CONTROLINTERNAL CONTROL AND CASH106.4 INTERNAL CONTROLS FOR E-COMMERCERisk AssessmentA company must identify its risks. For example, KraftFoods faces the risk that its foodproducts may harm people, American Airlines planesmay crash, and all companies face the risk of bankruptcy.Companies facing difficulties might be tempted to falsifythe financial statements to make themselves look betterthan they really are. As part of the internal control system,the company’s business risk must be assessed. The higherthe risk, the more controls must be in place to safeguardthe company’s assets.INTERNAL CONTROL AND CASH86.3 THE COMPONENTS OF INTERNAL CONTROLControl ProceduresControl procedures are designed to ensure that thebusiness’s goals are achieved.INTERNAL CONTROL AND CASHINTERNAL CONTROL AND CASH11MA. Nguyen Quoc Nhat- nhatnq.faa@gmail.comWhether the business is Smart Touch, Microsoft,all companiesneed the following internal control procedures:- Competent, Reliable, and Ethical Personnel- Assignment of ResponsibilitiesINTERNAL CONTROL AND CASH122International Financial AccountingCHAPTER 6 ...