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    Discuss internal control principles, documentation, reasonable assurance

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    2. What principles of internal control apply to most business enterprises?

    5. How do documentation procedures contribute to good internal control?

    8. The management of Borke Company asks you, as the company accountant, to explain (a) the concept of reasonable assurance in internal control and (b) the importance of the human factor in internal control.

    14. Mary Miller Company's internal controls over cash disbursements provide for the treasurer to sign checks imprinted by a check-writer after comparing the check with the approved invoice. Identify the internal control principles that are present in these controls.

    19. "The use of a bank contributes significantly to good internal control over cash." Is this true? Why or why not?

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    2. What principles of internal control apply to most business enterprises?

    v a logical organizational plan which clearly identifies lines of authority and delegation of responsibility, and which segregates incompatible functions;
    v an adequate accounting structure (including budgetary techniques, a chart of accounts, procedural manuals and instructions, which reflect the flow of transactions);
    v a complete information reporting structure (internal audit personnel must be responsible for the continuous examination and assessment of all internal controls);
    v transactions should be promptly recorded;
    v competent personnel with integrity should be hired and properly trained;
    v actions are only taken by individuals acting within their authority;
    v adequate physical security for electronic data, including back-ups, and for paper documentation;
    v access to assets should be limited to authorized individuals on a need-to-know basis;
    v accounting records should be compared to assets on a regular basis. This comparison should be done at times by individuals other than those having custody; and
    v management should review the organization's financial operations and position and internal controls at regular and frequent intervals.
    v periodically identify, in cooperation with the operational sectors, the level of risk inherent in the various business activities, taking into account the existing internal control mechanism (internal control mapping);
    v design, with the group's specialists, the homogeneous manual of best practices for managing the risks inherent in the different processes (internal control engineering);
    v make the manual available to the operating personnel for them to internalize the practices (internal control distribution);
    v periodically and independently verify that the operating personnel are complying with the manual (internal control review);
    v provide management and the Audit Committee of the Board of Directors with an independent opinion on the overall level of internal control to deal with the risks inherent in the various activities (internal control communication).

    5. How do documentation procedures contribute to good internal control?
    Documentation procedures contribute to good internal control because the use ...

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