Chapter 5 Sarbanes-Oxley, Internal Control, and Cash

Sarbanes-Oxley Act of 2002

Objectives of Internal Control

Elements of Internal Control Control environment Risk assessment Control procedures Monitoring Information and communication

Control Environment

Risk Assessment Identifies risks so management can take steps to control them

Control Procedures

Monitoring Locates weaknesses and improves control effectiveness Includes on-going efforts and separate evaluations

Information and Communication Risk Assessment ControlEnvironment Monitoring ControlProcedures

Limitations of Internal Controls Human Elements Cost / Benefit of System

The Nature of Cash Coins Currency Checks Money Orders Money on Deposit

Cash Received from Sales

Cash Received in the Mail Remittance Advice Person Opening Mail CheckDeposit

Cash Received by EFT Company Bank Customer Bank

Control Over Cash Payments Voucher Check issued to vendor Approved voucher entered to System Invoice, Purchase Order, and Receiving Report

Nature of a Bank account and its use for controlling cash

Bank Statement Reconciliation

Steps in the Reconciliation Process

Special Purpose Cash Funds – Petty Cash

NetSolutions - Sales Transactions

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