Question

List the seven broad principles of internal control.

Short answer

Answer

The seven broad principles of internal control are:

Establish responsibilities; maintain adequate records, Insure assets and bond key employees, Separate recordkeeping from the custody of assets, Divide responsibilities for related transactions, Apply technology controls, and Perform regular and independent reviews.

Step-by-step solution

Step-by-Step SolutionStep 1: Introduction to the topic-

Inside control: Inside control is an interaction affected by an organization's board of directors, the management, and other personnel, intended to give sensible assurance: That data is solid, precise, suitable consistent with material regulations, guidelines, agreements, arrangements, and systems.

The list of seven broad principles of internal control-

The seven broad principles of internal control are:

Establish responsibilities:Proper internal control means that obligation regarding an undertaking is settled and relegated to one individual. When an issue happens in an organization where the obligation isn't laid out, figuring out who is at fault is difficult.

Maintain adequate records:Proper record keeping safeguards assets and guarantees that employees utilize recommended methods.Dependable records are likewise sources of information that managers use to monitor company activities.

Insure assets and bond key employees: Proper internal control implies that assets are satisfactorily guaranteed against loss. Workers taking care of a lot of money and effectively movable assets are bonded.

Separate recordkeeping from the custody of assets: An individual who controls or has access to an asset should not approach that asset’s accounting records. This principle decreases the gamble of burglary or misuse of a resource because the individual with command over it knows that another individual keeps its records.

Divide responsibilities for related transactions: Good internal control isolates responsibility regarding exchange or a series of related exchanges between at least two people or divisions.

Apply technology controls:Cash registers, time clocks, and individual identification scanners are instances of devices that can work on internal control.A cash register with a locked-in tape or electronic document records each cash sale.

Perform regular and independent reviews: Personnel changes, the stress of time pressures, and technological advances open doors for alternate routes and passes. Regular reviews of internal control systems are expected to guarantee that methods are followed to counter these factors.