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Evaluation of System of Internal Control-Lbj Company

In: Business and Management

Submitted By mirandak
Words 1020
Pages 5
Introduction

Internal control methods and measures are adopted to safeguard assets, enhance accuracy and reliability of accounting records, increase efficiency of operations and ensure compliance with laws and regulations.

Control environment. The management style and the expectations of upper‐level managers, particularly their control policies, determine the control environment. An effective control environment helps to ensure that established policies and procedures are followed. The control environment includes independent oversight provided by a board of directors and, in publicly held companies, by an audit committee; management's integrity, ethical values, and philosophy; a defined organizational structure with competent and trustworthy employees; and the assignment of authority and responsibility.
Control activities are the specific policies and procedures management uses to achieve its objectives. The most important control activities involve segregation of duties, proper authorization of transactions and activities, adequate documents and records, physical control over assets and records, and independent checks on performance. A short description of each of these control activities appears below.
• Segregation of duties requires that different individuals be assigned responsibility for different elements of related activities, particularly those involving authorization, custody, or recordkeeping. For example, the same person who is responsible for an asset's recordkeeping should not be responsible for physical control of that asset. Having different individuals perform these functions creates a system of checks and balances.
• Proper authorization of transactions and activities helps ensure that all company activities adhere to established guidelines unless responsible managers authorize another course of action.
• Adequate documents and…...

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