2024 – What is the control environment How does the control environment affect a company s internal controls

What is the control environment? How does the control environment affect a company’s internal controls? What are the negative and positive elements of a control environment? What are two examples of strong and weak internal controls in organizations where you have worked or have first-hand knowledge? 

 

 

 

How would you describe the key internal controls that should be in place to protect cash in a cash rich environment such as a merchandiser? 

 

 

 

 

One thing that is associated with an organization’s internal controls over cash is bank reconciliation. Bank reconciliation is necessary because the balance per bank and balance seldom agree.  The lack of agreement may be the result of time lags and errors.

 

To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by an employee who has no other responsibilities pertaining to cash (the company’s authorized check signers and record keepers cannot perform the bank reconciliation)

 

In reconciling the bank statement, it is customary to reconcile the balance per books and balance per bank to their adjusted cash balances. The reconciliation schedule consists of the two sections.

 

The steps in preparing a bank reconciliation are:

1.    Determine deposits in transit.

2.    Determine outstanding checks.

3.    Note any errors discovered.

4.    Trace bank memoranda to the records.