Transactions’ Cycles and Internal Control
Transactions’ Cycles and Internal Control When a company is confronted with a loss it might have prevented, it is too late. After a litigation process the odds of recovering diminish with each day that goes by. A proactive approach calls for an implementation of adequate internal controls for each transaction cycle where the objectives and procedures for such transaction cycles are fully accomplished. A well designed internal control should ensure five objectives: 1. Authorization 2. Accountability and comparison 3. Proper recording. Under proper recording, completeness is a paramount. It ensures that transactions are not omitted from the accounting records. The valuation part of proper recording deals with the assurance that transactions are recorded at the actual amounts at which they occurred. In addition it considers, proper classification, affecting the accounts that should be affected by each transaction, and timing of transactions which should be recorded in the account
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