Table of Contents

Chapter 1 - The Accounting Controls Environment 1

The Genesis of Accounting Controls. 1

The Proper Balance of Control Systems. 2

The Nature of Risk. 4

Common Fraud Risk Factors. 4

Control Principles. 6

The Failings of Internal Controls. 8

Preventive and Detective Controls. 8

Manual and Automated Controls. 9

Constructing a System of Controls. 10

Special Case - Acquisitions. 10

Special Case – Employee Turnover. 11

Special Case – Rapid Growth. 12

Control System Documentation. 13

Terminating Controls. 13

Controls Education. 14

Structure of this Book. 15

Chapter 2 - Order Entry Controls. 20

Order Entry Process Overview.. 20

In-Process Order Entry Controls. 22

Alternative Order Entry Control Systems. 25

Control System for Manual Order Entry. 25

Control System for Computerized Order Entry. 27

Additional Order Entry Controls – Fraud Related. 27

Additional Order Entry Controls – Periodic Actions. 29

Additional Accounting Policies. 30

Chapter 3 - Credit Controls. 33

Credit Process Overview.. 33

In-Process Credit Controls. 36

Alternative Credit Control Systems. 37

Control System for Manual Credit Management 37

Control System for Computerized Credit Management 38

Additional Credit Controls – Fraud Related. 38

Additional Credit Controls – Periodic Actions. 39

Additional Accounting Policies. 40

Chapter 4 - Shipping Controls. 43

Shipping Process Overview.. 43

In-Process Shipping Controls. 46

Alternative Shipping Control Systems. 47

Control System for Manual Shipping. 47

Control System for Computerized Shipping. 48

Additional Shipping Controls – Fraud Related. 48

Additional Shipping Controls – Periodic Actions. 49

Chapter 5 - Customer Billing Controls. 52

Customer Billing Process Overview.. 52

In-Process Customer Billing Controls. 55

Alternative Customer Billing Control Systems. 58

Control System for Manual Customer Billings. 58

Control System for Computerized Customer Billings. 59

Additional Customer Billing Controls – Fraud Related. 60

Additional Customer Billing Controls – Periodic Actions. 61

Additional Accounting Policies. 63

Chapter 6 - Collection Controls. 66

Collection Process Overview.. 66

In-Process Collection Controls. 68

Alternative Collection Control Systems. 70

Additional Collection Controls. 70

Additional Accounting Policies. 71

Chapter 7 - Cash Receipts Controls. 74

Cash Receipts Process Overview.. 74

In-Process Cash Receipts Controls. 78

Alternative Cash Receipts Control Systems. 82

Control System for Cash Receipts. 82

Control System for Check Receipts. 83

Control System for Lockbox Receipts. 84

Control System for Remote Deposit Capture. 85

Additional Cash Receipts Controls – Fraud Related. 86

Additional Cash Receipts Controls – Periodic Actions. 89

Additional Accounting Policies. 90

Chapter 8 - Purchasing Controls. 92

Purchasing Process Overview.. 92

In-Process Purchasing Controls. 95

Alternative Purchasing Control Systems. 97

Control System for Purchasing with Bids. 97

Control System for Purchasing without Bids. 100

Controls for Purchasing with a Computerized System... 100

Additional Purchasing Controls – Fraud Related. 101

Additional Purchasing Controls – Periodic Actions. 102

Additional Accounting Policies. 104

Chapter 9 - Accounts Payable Controls. 106

Accounts Payable Process Overview.. 106

In-Process Accounts Payable Controls. 108

Alternative Accounts Payable Control Systems. 114

Control System for Manual Accounts Payable. 114

Control System for Computerized Accounts Payable. 115

Control System for Evaluated Receipts. 117

Additional Payables Controls – Trend Analysis. 118

Additional Payables Controls – Fraud Related. 119

Additional Payables Controls – Periodic Actions. 120

Additional Accounting Policies. 121

Chapter 10 - Expense Report Controls. 125

Expense Report Process Overview.. 125

In-Process Accounts Payable Controls. 127

Alternative Expense Report Control Systems. 129

Control System for Manual Expense Reporting. 129

Control System for Computerized Expense Reporting. 130

Additional Expense Report Controls – Fraud Related. 131

Additional Expense Report Controls – Periodic Actions. 132

Additional Accounting Policies. 133

Chapter 11 - Procurement Card Controls. 136

Procurement Card Process Overview.. 136

In-Process Procurement Card Controls. 138

Alternative Procurement Card Control Systems. 140

Procurement Card Control System without a Transaction Log. 140

Procurement Card Control System with a Transaction Log. 141

Additional Payables Controls – Fraud Related. 142

Additional Payables Controls – Periodic Actions. 143

Additional Accounting Policies. 144

Chapter 12 - Petty Cash Controls. 147

Petty Cash Process Overview.. 147

In-Process Petty Cash Controls. 148

The Petty Cash Control System.. 150

Additional Payables Controls – Fraud Related. 151

Additional Accounting Policies. 152

Chapter 13 - Receiving Controls. 154

Receiving Process Overview.. 154

In-Process Receiving Controls. 156

Alternative Receiving Control Systems. 159

Control System for Receiving with a Manual System... 159

Controls for Receiving with a Computerized System... 160

Additional Receiving Controls – Fraud Related. 161

Additional Receiving Controls – Periodic Actions. 162

Additional Accounting Policies. 162

Chapter 14 - Payroll Controls. 165

Payroll Process Overview.. 165

In-Process Payroll Controls. 167

Alternative Payroll Control Systems. 172

Control System for Manual Payroll 172

Control System for Computerized Payroll 175

Control System for Outsourced Payroll 176

Control System for Cash Payroll Payments. 178

Additional Payroll Controls – Trend Analysis. 181

Additional Payroll Controls – Fraud Related. 181

Additional Payroll Controls – Periodic Actions. 183

Additional Payroll Controls – Related Activities. 185

Additional Accounting Policies. 186

Chapter 15 - Fixed Asset Controls. 188

Fixed Asset Process Overview.. 188

In-Process Fixed Asset Controls. 191

Alternative Fixed Asset Control Systems. 195

Additional Fixed Asset Controls – Fraud Related. 197

Additional Fixed Asset Controls – Periodic Actions. 198

Additional Accounting Policies. 199

Chapter 16 - Treasury Controls. 202

The Cash Forecasting Controls Environment 202

The Funds Investment Control Environment 204

The Debt Procurement Control Environment 206

The Stock Issuance Control Environment 207

Additional Treasury Controls – Fraud Related. 209

Chapter 17 - Financial Reporting Controls. 211

Financial Reporting Overview.. 211

In-Process Financial Reporting Controls. 214

Additional Controls for Public Companies. 218

Balancing Controls against Speed. 219

Additional Financial Reporting Controls – Fraud Related. 219

Additional Financial Reporting Controls – Periodic Actions. 219

Additional Accounting Policies. 221

Chapter 18 - Other Controls. 224

Acquisition Controls. 224

Budgeting Controls. 225

Budget Creation Controls. 225

Budget Integration Controls. 226

Summary of Budget Controls. 227

Gift Card Controls. 228

Information Technology Controls. 228

Inventory Recordation Controls. 230

Inventory Valuation Controls. 230

Project Controls. 232

Controls for Cost Plus Pricing Arrangements. 232

Controls for Fixed Fee Pricing Arrangements. 233

Controls for Internal Projects. 234

Summary of Project Controls. 235

Answers to Chapter Questions. 238

Glossary. 256

Index. 260

 

Final Examination…………………………………………………………………………………………………267