1. GLENCOE / McGraw-Hill

2. Internal Control and the Voucher System

3. 1.Explain the general principles of internal control. 2.Explain how the voucher system facilitates internal control. Internal Control Section Objectives

4. To safeguard assets To achieve efficient processing of transactions To ensure the accuracy and reliability of financial records Purposes of Internal Control Page 950

5. Division of responsibilities Effective training of employees Capable personnel in key positions Unannounced changes in assignments All transactions supported by adequate documentation Essential Internal Controls Page 950

6. Essential Internal Controls Page 950 All document numbers accounted for Periodic review of control procedures by an outside accounting firm Strong audit trail Electronic and mechanical control devices Frequent evaluation of internal control system

7. The Voucher System as a Tool of Internal Control Page 951

8. The voucher system is a method of controlling liabilities and cash payments. ANSWER: QUESTION: What is the voucher system? Page 951

9. Form used to authorize payments Focal point in an effective internal control system Payment Voucher Page 951

10. Payments, except for small petty cash items, are made by check. Checks are issued based on properly approved vouchers. The voucher system is most appropriate for medium- and large-sized companies. Voucher System Page 951

11. Controls Involved in a Voucher System All liabilities are authorized. All payments are made by check, except for petty cash disbursements. All checks are issued based on properly approved vouchers. Vouchers are used to set up and replenish cash funds. Vouchers are used to cover bills and invoices received from outside parties. Page 952

12. All bills and invoices are verified before they are approved for payment. Controls Involved in a Voucher System Only experienced and responsible employees are allowed to approve invoices for payment. Invoices are attached to vouchers to provide supporting documentation. Different employees approve the vouchers, record vouchers and payments, and sign and mail checks. All vouchers are kept on file for a specified period of time. Page 952

13. REVIEWREVIEW A(n) ____________________ is designed to safeguard the assets of a business. A(n) ______________ is a method of controlling liabilities and cash payments. A(n) _______________ is a form used to authorize payments. payment voucher voucher system internal control system Complete the following sentences:

14. REVIEWREVIEW In a voucher system, ______ are issued based on properly approved vouchers. The voucher system is most appropriate for ________ and _____ sized companies. Invoices are attached to vouchers to provide _______________________. supporting documentation medium- checks Complete the following sentences: large-

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