List five features of an internal control system that relate to safeguarding cash and reducing the likelihood of theft.
What will be an ideal response?
Any five of the nine features of an internal control system listed below should be included in the answer:
• Segregating duties so that fraud or theft requires collusion.
• Hiring and training competent employees.
• Bonding employees to recover losses through insurance.
• Requiring employees to be absent from their jobs so that their replacements can discover errors or fraudulent activity that might have occurred.
• Establishing proper procedures for processing transactions.
• Establishing clear lines of authority and responsibility.
• Using prenumbered documents.
• Implementing physical controls such as locking cash in a safe.
• Conducting performance evaluations through independent internal and external audits.
All nine features help to ensure that cash is safeguarded and reduce the likelihood of theft.
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