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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 8, Problem 1PEB
Textbook Problem
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Identify each of the following as relating to (a) the control environment, (b) control procedures, or (c) information and communication:

  1. 1. Organizational structure
  2. 2. Report of company’s conformity with environmental laws and regulations
  3. 3. Proofs and security measures

To determine

Identify the internal control elements.

Explanation of Solution

Internal Control: Internal control refers to the policies, and plans of the business organization along with other measures with a view to safeguard its assets, encourage the employees to adhere to the plans, to improve on the operational efficiency, and to ensure correct and reliable accounting information.

Five elements of internal control are as below:

  • • Control Environment: Control Environment refers to the attitude of top brass of the company or the corporate culture. The top brass of the company must set the tone to improve the morale for rest of the employees of the business.
  • • Risk assessment: The business must be able identify the risk associated with it, and accordingly use the internal control to safeguard its assets and ensures fairness in presentation in accounting information.
  • • Control procedures: The objective of setting the control procedure is to ensure that the business achieves its objectives.
  • • Monitoring controls: The internal control used in the business is being monitored by the internal auditors who are hired by the business, to ensure that the employees are adhering to the policies of the business and running the operations efficiently...

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Chapter 8 Solutions

Financial Accounting
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