Accounting
Q1 - Internal Controls (lecture 3): 15 Marks.
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He said he will ask either a petty cash question or a bank reconciliation one but not both. The question will also probably test us on e-controls or cash control for cash receipts and cash payments. What is internal control? It is the organisational plan and all the related measures that an entity adopts to: * safeguard assets * encourage adherence to company policies * promote operational efficiency * ensure accurate and reliable accounting records.
It is either an administrative control or an accounting control
Characteristics of an effective internal control system include: * Competent, reliable, and ethical personnel * Assignment of responsibilities * Proper authorisation * Separation of duties
Internal Controls for e-Commerce * Stolen credit card numbers * Computer virus and Trojan horses * Impersonation of companies
Encryption is the primary method of achieving confidentiality in e-commerce. Plain-text messages are rearranged by some mathematical process. The encrypted message cannot be read by anyone who does not know the process.
Why is this an accounting problem? * How much do companies spend on online security? * Forrester Research estimates that companies should spend between 7.5% and 9% of their total IT budget on internet security * IT budget is roughly 5-10% of sales, depending on your business model (could be higher) * Internet security could be as high as 0.9% of your total sales. Not much? * Apple’s sales last year were 46.33 billion. 0.9% is about $410 million dollars!
The Limitations of Internal Control: * Most internal control measures can be circumvented or overcome * Collusion is when two or more employees work as a team with the purpose to defraud the firm * Consider the Westpac bank fraud * “A former Westpac employee and a Sydney fruiterer have been
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He said he will ask either a petty cash question or a bank reconciliation one but not both. The question will also probably test us on e-controls or cash control for cash receipts and cash payments. What is internal control? It is the organisational plan and all the related measures that an entity adopts to: * safeguard assets * encourage adherence to company policies * promote operational efficiency * ensure accurate and reliable accounting records.
It is either an administrative control or an accounting control
Characteristics of an effective internal control system include: * Competent, reliable, and ethical personnel * Assignment of responsibilities * Proper authorisation * Separation of duties
Internal Controls for e-Commerce * Stolen credit card numbers * Computer virus and Trojan horses * Impersonation of companies
Encryption is the primary method of achieving confidentiality in e-commerce. Plain-text messages are rearranged by some mathematical process. The encrypted message cannot be read by anyone who does not know the process.
Why is this an accounting problem? * How much do companies spend on online security? * Forrester Research estimates that companies should spend between 7.5% and 9% of their total IT budget on internet security * IT budget is roughly 5-10% of sales, depending on your business model (could be higher) * Internet security could be as high as 0.9% of your total sales. Not much? * Apple’s sales last year were 46.33 billion. 0.9% is about $410 million dollars!
The Limitations of Internal Control: * Most internal control measures can be circumvented or overcome * Collusion is when two or more employees work as a team with the purpose to defraud the firm * Consider the Westpac bank fraud * “A former Westpac employee and a Sydney fruiterer have been