A document outlining the strategy for managing inherent and control risks in relation to the financial statements of an audit client.
A bank reconciliation statement reconciles the bank balance in an organization's books with the bank statement. Differences may arise from cheques drawn by the organization but not yet presented to the bank, bank charges deducted from the account not yet notified to the organization, and payments made to the bank but not yet recorded by the organization. Bank reconciliations are usually performed weekly or monthly and serve as a form of internal control.
A compliance audit is an extensive evaluation of an organization's adherence to regulatory guidelines. This includes a scrutiny of internal control procedures to ensure proper operation according to established protocols.
A creditors' ledger is a memorandum ledger account used to track individual creditors' accounts, contributing to internal control by recording and comparing transactions with the nominal ledger.
Debtors refer to individuals or entities that owe money to an organization, often due to sales of goods or services. This concept is significant in accounting as it affects the balance sheet and requires careful management to ensure accurate financial reporting.
A nominal ledger control account recording the total of entries made to individual debtors' ledgers from the sales day book and the cash receipts journal, used to ensure internal accounting controls.
An in-depth analysis of internal control features within an organization, specifically designed to evaluate their effectiveness and compliance.
Internal control encompasses measures that an organization implements to reduce opportunities for fraud or misfeasance. Examples include requiring multiple signatures on documents, enhancing security for stock handling, task division, maintaining control accounts, using special passwords, and handling computer files securely. It is crucial for internal audits to ensure the effectiveness of these controls to instill confidence in external auditors and management regarding the integrity of the organization’s operations.
Segregation of duties (SoD) is an internal control concept designed to prevent error and fraud by ensuring that no single individual has control over all aspects of a critical transaction or operation.
An approach to auditing focused on evaluating an organization's internal control system to determine the quality of its accounting system, thereby assessing the required level of substantive testing for financial statements.
