Multiple Choice
Which of the following is NOT an example of a common control activity within an organization's internal control system?
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6. Internal Controls and Reporting Cash
Five Components of Internal Controls
Multiple Choice
Which of the following is desirable in a good system of internal accounting control?
A
Separation of duties among employees
B
Lack of documentation for transactions
C
Minimal supervision of accounting staff
D
Allowing one person to handle all aspects of a transaction
Verified step by step guidance1
Understand the concept of internal accounting control: Internal accounting control refers to the processes and procedures implemented by a company to ensure the accuracy and reliability of financial reporting, safeguard assets, and prevent fraud or errors.
Review the principle of separation of duties: Separation of duties is a key component of internal control. It involves dividing responsibilities among different employees to reduce the risk of errors or fraud. For example, one person might handle cash receipts while another records the transactions.
Evaluate the importance of documentation: Proper documentation for transactions is essential in a good internal control system. It provides a clear audit trail and ensures accountability for all financial activities.
Consider the role of supervision: Adequate supervision of accounting staff is necessary to ensure compliance with policies and procedures, detect errors, and prevent fraudulent activities.
Analyze the risks of allowing one person to handle all aspects of a transaction: When one individual is responsible for all parts of a transaction (e.g., authorization, recording, and custody of assets), it increases the risk of fraud or errors due to lack of oversight and accountability.
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