From pages 4-1 and 4-2 of the VLN, the COSO Framework describes 5 components of internal control. What is the purpose of internal controls from a financial accounting perspective?1. To guarantee no fraud will occur in the organization.2. To help safeguard the company's assets.3. To help improve the accuracy and reliability of the accounting information. 4.To prevent collusion. Group of answer choicesA. 1,2, and 3B. 2 and 3C. 2, 3, and 4D.1, 2, 3, and 4 Information and CommunicationThe purpose of accounting is to provide relevant and reliableinformation to decision makers. Providing accurate information isan important aspect of internal controls.MonitorMonitor the internal control system to make sure it is adequateLimitations of Internal ControlCollusionPART B: CashCash and Cash EquivalentsCash equivalent-SHORT TERM INVESTMENT WITH ORIGINALMATURITY OF THREE MONTHS OR LESS (91 DAYS OR LESS).It must meet the definition at time of purchase to be a cash equivalent.If it does not meet the definition at purchase, it will never beclassified as a cash equivalent.ExamplesItems classified as CashCoins and currencyItems classified as Cash EquivalentCompany Money market account(with original maturity 3 months or less)ChecksCustomer's payment using credit card US Treasury bills (T-bills)Customer's payment using debit card Commercial paperCompany balances in banking accounts Certificates of Deposits (CD)Practice: Is the following Cash, Cash Equivalent or Neither.If neither, identify the account.A cashier's checkCustomer checks to be depositedSix-month commercial paperSixty-day US Treasury billsngsat the Ft. Myers Savings & LoanAn employee borrows from the company (an IOU)Three-month commercial paperControl over Cash Receipts1. Record all cash receipts and deposit them as soon as possible.2. Separate the person who deposits the cash/checks from theperson who receives the cash/checks.3. A different person should record the receipts in the accountingrecords. Verify the deposit with the deposit slip.4. Accept credit cards/debit cards to reduce the amount of cashemployees' handle. PART A: Internal ControlsSarbanes-Oxley Act of 2002 (SOX)Management (Corporate Executives) are responsible for thefinancial statements and effectiveness of its internal controlstructure and procedures.Auditor must assess the company's internal control and report asto its effectiveness. Auditor must be independent-cannotprovide non-audit services. Auditors must retain work papers forseven years. Lead audit partners are required to rotate off theaudit client every five years.Audit committee is a subset of the Board of Directors-they actas a direct contact between the stockholders and the auditors. Theaudit committee hires the auditor.CEO and CF0 must certify the financial statements fairlyrepresent the financial position and the results of operations and astatement that the company's internal controls are adequate.Purpose of Internal Control-Financial Accountingperspective:1. Improve the accuracy and reliability of accounting information.2. Safeguard the company's assets.COSO (Committee on Sponsoring Organizations)FRAMEWORKControl Environment-The success of an internal control system depends on theoperating style of management and the competency of the peopleresponsible for the system-ethical tone of top management-Personnel policies and practices are important components ofthe internal control systemRisk AssessmentContinually assessing the risks associated with forces preventingthe company from reaching its goalsControl ActivitySeparation of duties: should separate “custody - authorization –reporting"Information and CommunicationThauont and ualiekle

Question

From pages 4-1 and 4-2 of the VLN, the COSO Framework describes 5 components of internal control.  What is the purpose of internal controls from a financial accounting perspective?1. To guarantee no fraud will occur in the organization.2. To help safeguard the company's assets.3. To help improve the accuracy and reliability of the accounting information. 4.To prevent collusion. Group of answer choicesA. 1,2, and 3B. 2 and 3C. 2, 3, and 4D.1, 2, 3, and 4 Information and CommunicationThe purpose of accounting is to provide relevant and reliableinformation to decision makers. Providing accurate information isan important aspect of internal controls.MonitorMonitor the internal control system to make sure it is adequateLimitations of Internal ControlCollusionPART B: CashCash and Cash EquivalentsCash equivalent-SHORT TERM INVESTMENT WITH ORIGINALMATURITY OF THREE MONTHS OR LESS (91 DAYS OR LESS).It must meet the definition at time of purchase to be a cash equivalent.If it does not meet the definition at purchase, it will never beclassified as a cash equivalent.ExamplesItems classified as CashCoins and currencyItems classified as Cash EquivalentCompany Money market account(with original maturity 3 months or less)ChecksCustomer's payment using credit card US Treasury bills (T-bills)Customer's payment using debit card Commercial paperCompany balances in banking accounts Certificates of Deposits (CD)Practice: Is the following Cash, Cash Equivalent or Neither.If neither, identify the account.A cashier's checkCustomer checks to be depositedSix-month commercial paperSixty-day US Treasury billsngsat the Ft. Myers Savings & LoanAn employee borrows from the company (an IOU)Three-month commercial paperControl over Cash Receipts1. Record all cash receipts and deposit them as soon as possible.2. Separate the person who deposits the cash/checks from theperson who receives the cash/checks.3. A different person should record the receipts in the accountingrecords. Verify the deposit with the deposit slip.4. Accept credit cards/debit cards to reduce the amount of cashemployees' handle. PART A: Internal ControlsSarbanes-Oxley Act of 2002 (SOX)Management (Corporate Executives) are responsible for thefinancial statements and effectiveness of its internal controlstructure and procedures.Auditor must assess the company's internal control and report asto its effectiveness. Auditor must be independent-cannotprovide non-audit services. Auditors must retain work papers forseven years. Lead audit partners are required to rotate off theaudit client every five years.Audit committee is a subset of the Board of Directors-they actas a direct contact between the stockholders and the auditors. Theaudit committee hires the auditor.CEO and CF0 must certify the financial statements fairlyrepresent the financial position and the results of operations and astatement that the company's internal controls are adequate.Purpose of Internal Control-Financial Accountingperspective:1. Improve the accuracy and reliability of accounting information.2. Safeguard the company's assets.COSO (Committee on Sponsoring Organizations)FRAMEWORKControl Environment-The success of an internal control system depends on theoperating style of management and the competency of the peopleresponsible for the system-ethical tone of top management-Personnel policies and practices are important components ofthe internal control systemRisk AssessmentContinually assessing the risks associated with forces preventingthe company from reaching its goalsControl ActivitySeparation of duties: should separate “custody - authorization –reporting&#34;Information and CommunicationThauont and ualiekle

Accepted Answer

Ans. B -   2 and 3
2. To help safeguard the company's assets.
3. To help improve the accuracy and…