Principals for Internal Controls - Financial Accounting

The video tutorial explains the principles of internal controls, which are essential for businesses to safeguard their assets and ensure operational efficiency. It covers seven key principles: establishing responsibility, maintaining adequate records, insuring assets and bonding employees, separating record-keeping from asset custody, dividing responsibilities, applying technology controls, and performing regular reviews. Each principle is discussed with examples to illustrate its importance in preventing fraud and ensuring accountability.

What is the primary purpose of establishing responsibility in internal controls?

• To identify who is accountable if something goes wrong

• To increase the number of employees

• To reduce the cost of operations

• To ensure that tasks are completed on time

Why is it important to separate record-keeping from the custody of assets?

• To reduce paperwork

• To prevent theft and fraud

• To increase employee satisfaction

• To streamline operations

What is the purpose of bonding key employees?

• To ensure they do not leave the company

• To increase their job responsibilities

• To provide them with additional benefits

• To protect the company from losses due to employee theft

How can technology controls help in internal controls?

• By increasing the speed of transactions

• By eliminating the need for employee training

• By establishing clear accountability through tools like PIN numbers and cameras

• By reducing the need for physical security

What is the significance of performing regular and independent reviews of internal controls?

• To increase the workload of employees

• To ensure that internal controls are effective and not wasteful

• To reduce the number of audits

• To improve customer satisfaction