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Internal Controls

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Internal Controls
XXXXX XXXXXXX
XACC/280 Financial Accounting Concepts and Principles
January 2014

Internal Controls
Internal Controls two primary goals are to protect their assets from employee theft, robbery, and unauthorized usage. Also to increase accuracy of the company financial information, reducing risk of errors whether they are accidental or intentional. Internal Controls also ensure compliance with federal, state, and local laws and regulations that affect the operations of a business. Internal Controls are the responsibilities of the company to put into place, the responsibility of the management to see they are kept in place, and the responsibility of the employees to adhere to.
With Internal Controls they are classified as either preventive or detective. Preventive controls are designed to avoid error or irregularities from occurring. A few examples of preventive could be; separation of duties for cash handling by assigning different individuals to duties such as collecting cash, maintaining documentation, preparing deposits, and reconciling records. Detective controls are designed to identify an error or irregularity after it has occurred. These controls should be performed on a routine basis to identify any issues that pose potential risks to a company on a timely basis. A few examples are; an exception report detects and list incorrect or invalid entries or transactions; a comparison of validated Cash Receipt Vouchers to monthly account detail to detect deposits posted to erroneous accounts; and taking a physical inventory of computer equipment to check for misplaced or stolen property ("What Are Internal Controls", n.d.).
There are many things that may compromise the effectiveness of an internal control structure, inadequate segregation of duties, inappropriate access to assets, inadequate knowledge of company policies, form over

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