CH3 Internal Controls

Internal Control- A process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations.Purposes of internal control-Safeguarding assets-Ensuring financial statement reliability-Promoting operational efficiency-Encouraging compliance with management's directives

Control Environment refers to the tone at the top of the organization.

Involves using a taxonomy, business experience, research, and dialogue to identify the risks associated with operations.

Control activites refer to the actual internal controls implemented on the basis of the risk assessment.

For an internal control system to function effectively, its purpose, methods, and results must be communicated throughout the organization.

To determine the quality of internal control performance.

Adequate documentationBackground checksBackup of computer filesBackup of power suppliesBank reconciliationBatch control totalsData encryptionDocument matchingEdit checksFirewallsInsurance and bondingInternal auditsLimit checksLockbox systemsPhysical securityPreformatted date entry screensPrenumbered documentsRestrictive endorsement and daily deposits of checks receivedSegregation of dutiesUser training