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 an example of a proper internal controls strategy?

Using informal communication instead of documenting policies and procedures

Allowing one employee to handle all aspects of cash receipts and disbursements

Segregating duties so that no single employee is responsible for both recording and processing a transaction

Relying solely on external audits to detect errors or fraud

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Verified step by step guidance

Step 1: Understand the concept of internal controls. Internal controls are processes and procedures implemented by an organization to ensure the accuracy and reliability of financial reporting, safeguard assets, and prevent fraud or errors.

Step 2: Evaluate the options provided in the problem. Each option represents a potential strategy for internal controls. Analyze whether each option aligns with the principles of effective internal controls.

Step 3: Recognize the importance of segregation of duties. Segregating duties means dividing responsibilities among different employees to reduce the risk of errors or fraud. For example, one employee should not be responsible for both recording and processing a transaction.

Step 4: Identify why the other options are not proper internal controls strategies. For instance, informal communication lacks documentation, which is essential for accountability. Allowing one employee to handle all aspects of cash receipts and disbursements increases the risk of fraud. Relying solely on external audits is reactive rather than proactive.

Step 5: Conclude that the correct internal controls strategy is segregating duties, as it minimizes risks and ensures checks and balances within the organization.