Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Five Components of Internal Controls

Financial Accounting

6. Internal Controls and Reporting Cash

Five Components of Internal Controls

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Multiple Choice

Which of the following is the best way for owners of small businesses to maintain proper internal controls?

Rely solely on external auditors to detect and prevent fraud.

Actively participate in the daily operations and oversight of the business.

Delegate all financial responsibilities to a single trusted employee.

Avoid implementing segregation of duties due to limited staff.

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Verified step by step guidance

Understand the concept of internal controls: Internal controls are processes and procedures implemented by a business to safeguard assets, ensure accurate financial reporting, and prevent fraud. They are essential for maintaining the integrity of financial operations.

Evaluate the options provided: Analyze each option to determine its effectiveness in maintaining proper internal controls. Consider the risks and benefits associated with each approach.

Option 1: Rely solely on external auditors to detect and prevent fraud. External auditors play a role in reviewing financial statements, but they are not involved in daily operations. Sole reliance on them may leave gaps in internal controls.

Option 2: Actively participate in daily operations and oversight of the business. This option emphasizes the owner's involvement, which is crucial for small businesses. Active participation allows the owner to monitor activities, identify risks, and implement controls effectively.

Option 3 and 4: Delegating all financial responsibilities to a single trusted employee or avoiding segregation of duties can increase the risk of fraud and errors. Segregation of duties is a key principle in internal controls, even in small businesses with limited staff.