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Internal Control Structure:
Policies and procedures used by management to meet its objectives.
Adequate Segregation of Duties:
1. Strategy to provide an internal check on performance through separation
of custody of assets from accounting personnel.
Proper Procedures for Authorization:
1. Originates with the stockholders who elect a board of directors.
Adequate Documents and Records:
1. Documents allow management to review transactions for appropriate
authorization. (bills attached to checks ready for signature, check stubs
stapled to paid invoice)
Physical Control Over Assets and Records:
1. Physical precautions used to protect assets and records, such as locks
on doors, fireproof vaults, password verification, and security guards.
(blank checks are securely stored) (all checks are accounted for)
Independent Checks on Performance:
1. Procedures for continual internal verification of other controls.
(owner should receive bank statements and review all checks written) (owner
should verify bank reconciliation)
1. the control environment,
1. segregation of duties,
The control environment is comprised of such things as:
management's philosophy and operating
The Accounting System:
a. To identify, assemble, classify, analyze, record, and report the entity's transactions, and to maintain accountability for assets.
b. Should contain adequate controls to ensure objectives are met.
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