UT Knoxville ACCT 200 - Chapter 5, Controls, Fraud
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ACCT 200 Lecture 9 Outline of Last Lecture I. Quick NotesII. Problem 3-5III. Problem 3-6IV. Problem 3-8V. Problem 3-9VI. Problem 3-10VII. Problem 3-12Outline of Current Lecture I. Internal ControlsII. Fraud TriangleIII. Some objectivesIV. Sarbanes-Oxley ActV. Control EnvironmentVI. Controls of CashCurrent LectureI. Internal Controlsa. Internal controls—things put in place by a company to keep people honest (ex. Locks are internal controls)II. Fraud TriangleThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.a. The Fraud Triangle consists of opportunity, pressure, and rationalizationb. These are the 3 steps that lead to someone committing fraudulent actionsIII. Some objectivesa. Matching—match revenues with expensesb. Safeguard assets—keeping money and inventory secure (safes, locks, vaults, etc.)c. Misappropriation of assets—must make sure that assets are used for business purposesIV. Sarbanes-Oxley Acta. Know that this is only applied to public companiesi. A public company has stock that is traded on NYSE or NASDAQii. A private company is held by only a few owners and stock is not sold to average peopleb. This act requires public companies to ensure effective internal controlsV. Control Environmenta. Risk assessment—figuring out where fraud is likely to happenb. Control procedures—procedures that assess where fraud has actually happenedc. Segregation of dutiesseparate duties in order to keep people from pocketing cash/profitsd. Collusion—two or more people that are secretly working together to be dishonest and steal cash/assets from a company they work fore. Fraudulent statements—cooking the books, hiding money in your statements so you make more profitf. Misappropriation of assets—thefVI. Controls of Casha. Handling cashthis is why segregation of duties is important to ensure that more than one person is handling all of the cashit is also important that a record is kept of the cash that is receivedb. Cash short—miscellaneous expense, you do not have as much cash as you are supposed to havec. Cash over—other revenue, basically stealing from your customers (not giving them the correct change)d. Example: if you are a cashier and you have $2,000 recorded as sales on your income statement for the day, but you only have $1,974 in the register, this is cash

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