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Internal Control System

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The Internal Control System

Accounting is the process of identifying, analyzing, recording, summarizing, interpreting and reporting financial information to decision makers. Accounting information should be presented to society in a form that represents a true and fair view of operation. To accomplish this, accountants should have a clear understanding of accounting principles and concepts that govern the preparation of accounting statements and develop systems such as internal controls that assure the entity’s operations are properly and effectively recorded. Internal control systems help to ensure that the employees within an organisation carry out their duty and responsibility and act for the good of the business. There are certain key ingredients of a control system such as: environment control, risk assessment, control of flow of activities and monitoring. There are five main internal control procedures – proper authorization, segregation of duties, adequate documentation and records, physical safeguards over assets and records, and independent checks.
 Proper authorization of transactions and activities helps ensure that all company activities adhere to established guide lines unless responsible managers authorize another course of action.
 Segregation of duties requires that different individuals be assigned responsibility for different elements of related activities, particularly those involving authorization, custody, or recordkeeping.
 Adequate documents and records provide evidence that financial statements are accurate. Controls designed to ensure adequate recordkeeping include the creation of invoices and other documents that are easy to use and sufficiently informa tive; the use of prenumbered, consecutive documents; and the timely preparation of documents.
 Physical control over assets and records helps protect the company's assets. These

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