September 14, 2016 Computim

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Management processes built into the control environment and information system are the means by which companies gain access to the five goals of internal controls discussed previously. Examples contain proper separation of decent records, comparison and other checks, duties, appropriate approvals, and physical safeguards to shield http://oemsoftwarestore.org/ assets. AMEX Products routinely reviews its framework of internal controls, including the companys policies, processes and organizational structure. Corrective actions are taken to address any management deficiencies, and developments are executed as proper whether the business is Microsoft, AMEX Products, or a Starbucks shop, every major category of transactions must have the following internal control processes. In a company with great internal controls, no duty that was important is overlooked. Each individual in the information chain is significant. The chain should start with hiring. Background checks should be conducted on job applicants.

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Supervision and appropriate training, as well as paying wages that are competitive, helps ensure that employees are sufficiently competent due to their jobs. Employee responsibilities should be clearly laid out in position descriptions. As an example, the treasurers department should be in charge of cash signing and approving, along with management checks. Warehouse personnel should be in charge of storing and keeping track of stock. With clearly assigned responsibilities, all important jobs get done. In processing trades, smart direction separates three essential obligations: asset managing, record keeping, and trade acceptance. For example, in the event of AMEX Products, separation of the responsibilities of cash handling from record keeping for customer accounts receivable would have removed Melissa Prices incentive to engage in fraud, because it’d have caused it to be impossible for her to have lapped accounts receivable if another employee was maintaining the books. Ideally, someone should also review customer accounts and be responsible for writing off them if they become fully uncollectible. The bookkeeping department should be totally independent from your managing sections, including sales and production.

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What would occur if sales personnel, who were compensated according to a percentage of the amount of sales they made, approved the companys sales transactions to customers? Sales amounts could be inflated and mightn’t reflect the ultimate sum collected from customers. At any cost, accountants must not handle cash, and cash handlers mustn’t have use of the accounting records. If one employee has both cash- management and bookkeeping duties, that man hide the theft and can steal cash. This really is what happened at AMEX Products. For businesses which are too small to hire persons that are independent to do all of these functions, the key to good internal control is getting the owner involved, typically reconciling the monthly bank account, making bank deposits, or by approving all trades that are big. Offers Financial Accounting Homework Help