Question

Your friend, Lisa, plans to open a nail salon. Lisa states that she does not have time to develop and implement a system of internal controls.
(a) Explain to Lisa the components of internal control.
(b) Explain to Lisa at least 5 internal control procedures she must establish to protect herself against fraud. You should state specific internal control procedures from the textbook, and relate your answer to her nail salon business.

Answer 1

(a) Objectives of Internal control:

1) To help the management in achieving organizational objectives.

2) To maintain optimum utilization of the resources of an organization.

3) To prevent frauds and to detect errors.

4) To build a safeguard mechanism to company's asset.

5) To help in achieving operational efficiency.

b) 5 Internal control procedures:

1) Implementing segregation of duty mechanism.

2) Having an authorisation atmosphere to approve various transaction.

3) Keeping an internal check within the organization.

4) Laying down policies and assuring that the policies are met through.

5) keeping appropriate physical and logical access control in the system.