...AN EVALUATION OF THE INTERNAL CONTROLS SYSTEM FOR CASH FOR THE CASE OF NAIROBI SMALL BUSINESSES BY CLEOPHAS MUSINGA A Management Research Project Submitted In Partial Fulfillment For The Requirements Of The Award Of Bachelor Of Commerce (BCOM), School Of Business, University Of Nairobi JULY, 2008 DECLARATION This research project is our own original work and has not been submitted for academic purposes in any institution of higher leaning. Name Number Sign CLEOPHAS MUSINGA D33/6646/05 ………………………….. This research project has been submitted for examination with my approval as the university supervisor Signed……………………………. Date…………………………………………. Mr. Abdulatif Essajee Lecturer University of Nairobi TABLE OF CONTENTS DECLARATION i CHAPTER ONE 1 INTRODUCTION 1 1.1 Background of the study 1 1.2 Statement of the problem 5 1.3 Objectives of the study 6 1.4 Research questions 6 1.5 Scope of the study 6 1.6 Justification of the study 7 CHAPTER TWO 9 LITERARURE REVIEW 9 2.1 Evolution of internal controls 9 2.2 Components of Internal Controls 12 2.4 Relationship between a firm’s age and internal control 18 2.6 Internal controls in small businesses 19 CHAPTER THREE 21 RESEARCH METHODOLOGY 21 3.1 Research design 21 3.2 Population 21 3.3 Sample and Sampling Technique 21 3.4 Data collection methods 22 3.5 Data analysis 22 CHAPTER FOUR 23 DATA ANALYSIS AND FINDINGS 23 4.1 Introduction...
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...fraud in small business and narrowing the topic to two main factors that allow the fraud to take place. The presentation will be specifically informational in nature. Once I have finished my presentation, the audience will have a clear understanding of my central idea, which is why limited staff and family trust are reasons that small businesses are victims of accounting fraud. The ideal audience for my presentation would be a meeting of a small business alliance, chamber of commerce, entrepreneur club, and any other group or class that would benefit from learning about accounting fraud in small businesses. My topic would benefit a more specific group of people such as those that are interested in or work in the field of accounting or business. Since my intended audience are adults that are working in the field of accounting or business or have an interest in these fields; my topic is appropriate for the age range, interests and general knowledge of my audience. The importance of my presentation to the audience is significant since the individuals in the intended audience will be either working or interested in business or accounting and quite possibly be involved in a small business at some level. It will be important for them to know about the reasons small businesses are the most common victims of accounting fraud. Once informed about the reasons, they will be able to apply what they have learned from my presentation towards identifying possible fraud in the small business...
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...An internal control is a business practice, policy or procedure that is established within an organization to create value or minimize risk. It is broadly defined as a process effected by an entity's board of trustees, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: • Effectiveness and efficiency of operations • Reliability of financial reporting • Compliance with applicable laws and regulations • Safeguarding of assets Principles and procedures of internal control clarify their purpose in the following areas: · Establishing written control procedures and employment responsibilities to include selection and training of employees. · Maintaining adequate records and separating record keeping. · Asset control, limiting access to assets, conducting surprise checks, and dividing the responsibility for related transactions. · Rotating jobs, using machines for control, establishing standards, evaluations, bonding employees, and required vacations. · Using external audits, providing audit trails, numbering all control documents, and a continuous system review. · Control of product inventory. · Specific controls required for cash receipts and cash disbursements. · Setting and evaluating performance standards with actual results. Problems Unique to the Hospitality Industry Business Size Almost every hospitality operation can be described as a small business and small businesses...
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...exchange of standardized electronic transaction documents. It enables businesses to exchange business information electronically much faster, cheaper and more accurately than using paper-based systems. Based on my research, EDI is widely used in US like manufacturing, shipping, warehousing, construction, insurance, health care companies, and government. There are two obvious advantages for using EDI: (1), increasing business opportunities which companies can improve interaction with private sector companies; (2), reducing costs and time. There are both time and cost reduction in dealing with record keeping, mails, distributions, documents and processing orders. And also there will be more efficiency and accurate in application of EDI. Small companies can give themselves a competitive advantage by using EDI. I found the insurance company state farm is using EDI to reduce the administration cost and enhance the efficiency for the data of their business. Resources: http://office-pass.com/electronic_data_interchange.htm http://www.inc.com/encyclopedia/electronic-data-interchange.html Debate: Sarbanes-Oxley law passed in response to a number of major corporate and accounting scandals involving ENRON, WORLDCOM in the United States. These scandals resulted in a loss of public trust in accounting and financial reporting. Section 404 is a subset of Sox law which addresses financial statement reporting controls. SOX404 requires that managers report their findings in a special management’s...
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...concepts will be identified in the areas of describing a small-business line of business (LOB); determining which government procurement opportunity is aligned with the LOB using the Federal Business Opportunities Website; the firm’s current strategies and assessing the strategic success using financial figures or “soft” indicators as the background; providing a SWOT analysis to determine the internal and external factors in servicing the federal government and utilizing a gap analysis in satisfying the expected requirements; and creating an action plan to fulfill the expected requirements based on the gap analysis. According to ("SBA", 2013) the U.S. government is the world's largest buyer of products and services. Purchases by military and civilian installations amount to nearly $200 billion a year, and include everything from complex space vehicles to janitorial services and cancer research. In short, the government buys just about every category of commodity and service available. By law, federal agencies are required to establish contracting goals, such that 23% of all government buys are intended to go to small businesses. In addition, contract goals are established for women-owned businesses, small disadvantaged businesses, firms located in HUBZones and service disabled veteran-owned businesses. 1. What is the small-business line of business? Wright Telecommunications is a woman owned small-business seeking an opportunity to do business with the...
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...Title: Critical Writing and analysis Course Code: C07CP Assignment Title: ‘Final Essay’ Word Count: 2,561 Social media at small businesses Introduction Social media is defined ‘as the way in which people interact to create, share, and exchange information and ideas in virtual communities and networks’ (Katona & Sarvary, 2014). Few of the most common social media platforms are differentiated into social networks (such as Facebook, LinkedIn, Google+, instant messaging), collaboration networks (examples: slideshare, Wikipedia, Prezi, Google docs, Zoho docs, survey monkey), image sharing (Instagram, Flickr, Pinterest and Picasa), blogging (Tumblr, Blogger and Word-press), micro-blogging (Twitter) and video-sharing platform (YouTube, Blip and Vimeo). Apple does not use Facebook or Twitter for social media marketing because it is a multinational corporation, but not every business is as large scale and successful as Apple. Social media now represents a new horizon of marketing opportunities to businesses. Marketing is a practice, which establishes what products or services the customers might be interested in. Social media supports the development of marketing of businesses, to have a different perception about the brand; this allows creative methods to implement basic marketing. Social media marketing provides the tools that the businesses needs to be able to observe discussions through the internet efficiently (Assaad and Gómez, 2011). According to Gamboa and Gonçalves...
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...Internal Controls for Inflows Rosa Alvarez, Quenana Kent, Renee Witucki, Steven Mitchell, K’Dawn Saucedo ACC/544 October 15, 2012 Robert Cornett Internal Controls for Inflows Team C Consulting Firm Inc. was hired to review ABC Manufacturing Company’s policies and procedures. Team C Consulting Firm Inc. reviewed several areas of the business such as, cash, sales, accounts receivable, inventory, and production policies and procedures. Based on Team C Consulting Firm’s review and findings, ABC Manufacturing Company has weaknesses in each of the mentioned areas. Therefore, it is necessary ABC Manufacturing Company is provided with a comprehensive proposal of internal controls for each function of the company. Cash Controls Cash is the most liquid asset that a company possesses so it is important that certain controls be put in place in order to protect against theft, fraud, or any other type of misappropriation that may occur with a company’s cash supply. There is no paper trail that follows cash, and it is difficult to determine if cash is missing, for this reason cash should be the most tightly controlled asset. In order to properly control cash there are certain actions that must be implemented. Failing to implement these procedures can create an atmosphere of immense risk for the company and its cash balances. The first control procedure that should be implemented is separation of duties. Cash is usually kept in a cash register or sent via mail. Whoever receives cash...
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...A Framework for IT Governance in Small Businesses by Herman Koornhof A FRAMEWORK FOR IT G O V E R N A N C E by IN SMALL BUSINESSES Herman Koornhof TREATISE Submitted for the partial fulfilment of the requirements for the degree MAGISTER TECHNOLOGIAE in Business Information Systems in the FACULTY ENGINEERING, BUILT ENVIRONMENT OF THE AND INFORMATION TECHNOLOGY of the N E L S O N M A N D E L A M E T R O P O L I T A N U N I V E R SI T Y Supervisor: Prof. Rossouw von Solms January 2009 ii Declaration I, Herman Koornhof, hereby declare that: • • • The work in this treatise is my own work. All sources used or referred to have been documented and recognised. This treatise has not previously been submitted in full of partial fulfilment of the requirements for an equivalent or qualification at any other recognised educational institution. higher Herman Koornhof iii Acknowledgements I would like to express my gratitude to the following people: • My love, Jenny, for your love and understanding during the past year. Without your encouragement and inspiration this work would not have been possible. • • My family and friends for your interest and support. My supervisor, Prof. Rossouw von Solms, for your guidance and advice, and your detailed and constructive comments. • To Him who is able to do immeasurably more than all we ask or imagine, according to his power that is at work within us. iv Table...
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...and the country, as a whole, to achieve global competitiveness. In this respect, the IMP3 has adopted the overall theme ‘Malaysia - Towards Global Competitiveness’ and other countries also working towards on that. Industries must strive for global competitiveness through the transformation and innovation of the manufacturing and services sectors. According to The Small and Medium Industries Development Corporation (SMIDEC) SMEs account for close to 99 % of all the establishments in the manufacturing, services and agricultural sector, provide around 65% of total employment and it is expected that the value added production of SMEs to be around RM120 billion or 50 % of total production in the manufacturing sector by 2020. Malaysian SME contribution to the GDP was only 32 percent in 2006 compared to that of 40 percent in the United States, 57 percent in Germany, 55 percent in Japan, 60 percent in China, 57 percent in Indonesia and Thailand at 38.9 percent. Innovation and the capacity to innovate are among the most important factors that affect an organizations competitiveness and performance SMEs due their small size, limited managerial capabilities, as well as limited resources do face a challenging task in innovating. SMEs as compared to larger firms are weakly structured in innovation, low market power and scarcity of resources in order to appropriate the benefit of their innovation. In nature, SMEs do not require a statutory audit may still want some degree of independent...
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...Sarbanes Oxley Act Joslin Cuthbertson Hampton University Abstract The Sarbanes-Oxley Act came into effect in July 2002 and introduced major changes to the guidelines of corporate authority and financial practice. It is named after Senator Paul Sarbanes and Representative Michael Oxley, who were its main originators. The Sarbanes Oxley Act set a number of non-negotiable deadlines for publically traded companies to comply to. The Sarbanes-Oxley Act is arranged into eleven titles. As far as compliance is concerned, the most important section within these eleven titles is usually considered to be Section 404, which deals with internal controls. Since 2002, there has been a lot of debate about whether the act has positively or negatively affected corporate America. In this paper I have discussed the opinions of both sides of the argument. The Sarbanes-Oxley Act is a bill passed by Congress in 2002 after several corporations took actions that caused their companies to fail. These companies include Enron and WorldCom. As a result of these actions, stockholders lost confidence in the financial system. The intent of the bill is to protect investors of corporations by making the corporations accountable for any unacceptable accounting errors and practices. The Act is named after its main proponents, Senator Paul Sarbanes and Representative Michael Oxley. The Acts real name is the Public...
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...monetary amount gained from services that meets customers and client’s needs (Bateman and Snell, 2009)). Achieved goals are accomplished through assembling and coordinating financial information and other resources. The text describes organizing function as building a dynamic organization. This can be accomplished when people are working together to achieve the maximum success and by using skilled collaboration. Leading involves motivation, communication, guiding, and inspiring members to achieve certain goals. Managers should have leadership skills. They should also be able to encourage people to share their ideas and input during schedule business meetings. Controlling is another function which is needed in management practices. This function monitors performances and necessary changes, then seek to find if the changes has been implemented. Is the organization using its resources and are the quality and safety goals been met? Failure to monitor control of products can cause law suits, death from food poisoning, damages to the brand reputation and loss of monetary value. Function control...
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...------------------------------------------------- Fraud and forensic accounting in small business’ Tasha S. Barnes ------------------------------------------------- Fraud and forensic accounting in small business’ Tasha S. Barnes Accounting fraud is serious issues for all businesses, but they are especially challenging for small companies that are “cash strapped”. Fraud undermine decision making, lead to financial losses and, in some cases, even force companies to lay off staff or shut their doors. Fraud is a common problem for small businesses. According to the Association of Certified Fraud Examiners (ACFE), 30 percent of all fraud occurs in small companies. That is a disturbing fact considering that the estimated fraud loses for business of all sizes was nearly $2.9 trillion in 2009. Fraud occurs so frequently in small business for a couple of reasons. A common reason is that small companies typically have small or even single-person accounting staffs and limited internal controls; lack of separation of duty. It is typical to have the accountant also be the office manager and receiving clerk. Problems can arise if for no other reason than on one double checks the work. Besides being more susceptible to errors and fraud, small businesses also are less likely to discover them because financial audits are almost never performed. It seems, as though a new scam comes to light every day, with electronic-media inspired frauds such as phishing and spoofing, joining...
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...maintenance of a company. The payroll cycle consists of the steps a business takes from the beginning of a payroll period to the end. The steps usually begin with the creation of a payroll system. Following that, hours, pay rate, withholding deductions both required and voluntary, as well as gross pay and take home pay. Calculating these values is very important, and must be done individually per employee. Businesses may do this manually or using a computerized accounting system to do so for them. Regardless of the method used though, the business also must have solid internal controls for the payroll category. These include two main controls, which are, controls for efficiency and controls to safeguard payroll disbursements. Having incorrect records poses one of the greatest risks that a company faces when it comes to accounting for payroll. This is because it is almost like a domino effect in that when one inaccuracy occurs, several more subsequently result. Manual entries are not necessarily considered to be efficient, because here the risk of error is greater, than the risk using a computerized system. The computerized system creates and stores records, documents, and an array of information, all in one place, and computerized systems are equipped with tools that make calculations, write checks, print checks, etc., all virtually and more efficiently than manually doing so for each employee. However, computerized systems too, have faults and are by no means error free all the...
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...approaching retirement age and are running out of time to rebuild depleted accounts. Investors Corralling a group of investors can help you raise start up or expansion capital for your business without placing all of the risk of loss on you alone. These investors may be active partners in the business, or they may be silent investors who simply provide capital and wait for their returns. The disadvantage to bringing in investors is that you do give up a certain element of control over the company. Even if you retain a majority interest, you'll need to keep your investors happy. Additionally, if you share the risk with others, you'll also have to share the profits. Bank Loans William Thayer http://smallbusiness.chron.com/advantages-amp-disadvantages-bank-loans-47377.html Private Banks can be another good source of funding. For small ventures, you may be able to secure a personal loan or line of credit; for larger operations, you may have to leverage assets -- real estate, large equipment or inventory -- by using them as collateral to secure the loan. The advantage to borrowing the money is that it enables you to keep your cash on hand to use as operating capital or for personal survival...
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...operating on an outdated accounting system and probably thought that it was okay because he had auditors come in and authenticate the work it did. It is important to have a current system in order to keep accurate reports in keeping the company operating efficiently. Another failure was the reports that were produced by the AIS. Michael Koss never took the time to look at the financial records of the company. Even though he was the CEO of the company, he never took adequate time to read and compare the financial statements on a monthly or yearly basis. SOX The article recounts some specific problems within Koss: * Koss Corporation prepared materially inaccurate financial statements, book and records, and lacked adequate internal controls from fiscal years 2005 through 2009. * Michael Koss was supposed to approve the payment of invoices greater than $5,000, but no approval was needed for wire transfers or cashier’s checks (the primary method of theft by Sachdeva). * The computer system was more than 30 years old, and did not lock the accounting system at the end of a month to prevent later changes to the...
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