Internal Control inside the Company Assignment Example | Topics and Well Written Essays - 1750 words - 2

Internal Control inside the Company - Assignment Example Oakdale conducts these transactions via a computer link to a registered brokerage. Purchase and sales authorizations, along with broker’s advice, are maintained in an electronic file with authorized access by Oakdale’s treasurer. An electronic inventory list is kept perpetually. The transactions are keyed in by accounting personnel who receive a buy/sell transaction sheet from the treasurer. Deposits of checks for interest and dividends earned on investments are also recorded by the accounting department. Each month, the accounting manager and the treasurer prepare journal entries required to adjust the short-term investment account. The Solomon Auditor discovered that there was insufficient backup documentation attached to the journal entries reviewed to trace all transactions. 1- †¢Authorization of transactions is required to adequately safeguard assets against fraud and illegal transactions and provide a level of internal control. A formal system of transaction authorizations allows the commitment of company resources in accordance with management goals and objectives. Transactions must be executed according to the terms of their general or specific authorizations, by responsible personnel acting within the scope of their prescribed authority and responsibility. 2- Complete and accurate record keeping is necessary to assure that prompt, timely, and accurate recording of transactions or economic events occurs. Companies must make and keep books, records, and accounts that, in reasonable detail, accurately reflect the transactions and dispositions of assets. Furthermore, the recording of transactions is necessary to permit preparation of financial statements in conformity with GAAP. 4- Internal verification refers to the independent review of the accuracy and propriety of another party’s work, and the testing of the  recorded accountability for assets as compared to existing assets at reasonable time intervals.