Kế toán, kiểm toán - Internal control and cash

Internal Control and CashInternal ControlPolicies and procedures for protecting assets from improper useInternal ControlPolicies and procedures for protecting assets from improper use and for the detection and prevention of errors or irregularities in accountingElements of the Internal Control StructureControl EnvironmentAccounting SystemControl ProceduresControl EnvironmentManagement’s philosophy and operating styleOrganizational structureAudit committee of board of directorsAssigning authority and responsibilityControlling performancePolicies and practicesAccounting SystemIdentification and recording of all valid transactionsProper classification of transactionsProper measurement of dollar amountAssignment to proper periodProper presentation in financial statements and notesControl ProceduresProper authorization of transactions and activitiesSeparation of dutiesDocuments and recordsSafeguard over access to assets and recordsReview of internal control systemCashDeposits in checking and savings accounts and any item bank customarily accepts for immediate depositChallenge is to control inflows and outflows of cashInternal Control of CashClear separation of duties and responsibilities among those who handle and account for cashProper equipmentProper authorization for paymentOrganization of flow so that work of one person checked by anotherPeriodic testing of controlsPetty Cash FundSpecial fund of cash used for small paymentsEstablishmentImprest amount debited to asset account Petty CashPetty Cash FundExpendituresNo entryEvidenced by petty cash voucherReplenishmentCheck written to bring fund back to imprest amountRecord expenses evidenced by petty cash vouchersPetty Cash FundCash Over and ShortWhen amount to replenish does not equal vouchersBank Checking AccountMonthly bank statement conceptually a mirror image of company’s cash accountTiming differences in recording of deposits and clearing of checks causes difference in balance between bank and books.Requires reconciliationBank ReconciliationUses a record of an independent organization to prove the company’s recordsShows the items that account for the difference between Cash account balance and bank statement balance.Bank Reconciliation ProceduresCompare deposits shown on bank statement with debits to CashDeposits late in period not on bank statement are deposits in transitCompare checks clearing bank with credits to CashChecks not clearing bank are checks outstandingBank Reconciliation ProceduresCompare bank debit and credit memos to books to see if they have been recordedList any errors as amounts are comparedBank Reconciliation Per BooksAdd increases in cash already recorded by bank but not bookDeduct decreases in cash already recorded by bank but not bookAdd or deduct errors on booksBank Reconciliation Per BankAdd increases in cash recorded on book but not bankDeposits in transitDeduct decreases in cash already recorded on books but not bankChecks outstandingAdd or deduct errors by bankBank ReconciliationJournalize reconciling items from book side not recordedReconciliation not complete until all items have clearedMay take several months before we know that a specific month’s adjusted balance is in fact correctAnalyzing InformationIs balance higher or lower than previous year?What restrictions exist on cash?Compensating balancesWhere is cash invested?Comprehensive Analysis Case: Income StatementAre total revenues higher or lower?What is percent change in revenues?Is percent of cost of goods sold to total revenues increasing or decreasing?Is percent of total operating expenses to total revenues increasing or decreasing?Is percent of net income to total revenues increasing or decreasing?Comprehensive Analysis Case: Balance SheetAre total assets higher or lower?What is percent change in total assets?What are largest asset investments?Are largest asset investments increasing faster or slower than percent change in total revenues?Is percent total liabilities to total liabilities plus owners’ equity increasing or decreasing?Comprehensive Analysis Case: IntegrativeIs the company operating more or less efficiently using the least amount of assets to generate a given level of total revenuesCompute total asset turnoverComp. Analysis Case: Short-term Liquidity RatiosCurrent ratioQuick ratioAccounts receivable turnoverInventory turnoverIs ration better or worse than previous year?Comp. Analysis Case: Profitability RatioReturn on total assetsProfit marginTotal asset turnoverIs ROA better or worse than prior years?