Learning Objective 1 Describe the Sarbanes-Oxley Act of 2002 and its impact on internal controls and financial reporting

Sarbanes-Oxley Act of 2002

Learning Objective 2 Describe and illustrate the objectives and elements of internal control

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

Learning Objective 3 Describe and illustrate the application of internal controls to cash

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

Learning Objective 4 Describe the nature of a bank account and its use for controlling cash

Nature of a Bank account and its use for controlling cash

Bank Statement Reconciliation

Steps in the Reconciliation Process

NetSolutions - Sales Transactions

End of Chapter 5