Question

A system of internal control is intended to keep assets – such as cash – safe and enhance the accuracy and reliability of the accounting records. Independent internal verification and segregation of duties are, arguably, the most important internal control procedures to accomplish both. With respect to internal control over cash: a

. (1) What is independent internal verification (be sure to describe the phrase in your own words)

(2) Discuss how companies should conduct independent internal verification to promote internal control over cash? b. (1) What is segregation of duties (be sure to describe the phrase in your own words)

(2) Discuss how companies should “segregate” cash-handling duties?

Answer 1

Question No (a)(1):

Independent Internal Verification refers to review, comparison, and reconciliation of data prepared by employees.

It will be done by employees other than employees involved in the preparation of that data.

In large Companies, Independent Internal Verification is performed by Internal Auditors.

Question No (a)(2):

Companies shall perform periodical and Surprise checks to promote internal control over cash

Question No (b)(1):

Segregation of Duties:

Segregation of duties refers to the delegation of duties across more than a single employee to have control over the Cash Management.

Question No (b)(2):

Segregation of duties is the employee depositing the money in the bank shall be the person different from the person who had collected the money from Account Receivables.