IG011 - Accounting Communication: Preventing Embezzlement & Accuracy

This presentation focuses on preventing embezzlement through effective communication and internal controls within an organization. It addresses the case of potential embezzlement at Organization of Community Arts, highlighting how Mr. Smith's handling of accounting transactions without oversight, the crediting of membership fees to Mr. Jared's personal account, and the use of fake companies to issue checks contributed to the issue. The presentation outlines internal control system practices, including risk assessment, control activities, information and communication, and monitoring activities. It emphasizes the importance of rectitude, ethics, competence, and management's philosophy in establishing a controlled environment. Furthermore, the presentation details the responsibilities of management and employees in maintaining internal controls, and methods to ensure financial accuracy, such as segregating accounting duties, limiting financial system access, increasing oversight, and conducting periodic audits. The presentation references external sources to support its recommendations.

Communication in
Accounting
PREVENT EMBEZZLEMENT
FROM SAMIRA KAMRAN

Organization of Community Arts
(Embezzlement)
 Mr. Smith is working with company for last decade.
 Company’s all accounting transactions has handled of company
Mr. Smith.
 Board of Directors does not oversight.
 The personal account of Mr. Jared are credited in by Membership
fees.
 Jared issues personal checks from the company’s bank account.
 Jared incorporated an fake companies to issue checks and then
deposit in his personal account.

Internal Control System

Practices to Prevent
Embezzlement
 By asserting risks
 By observing the activities
 By giving information
 By communicating further
 By managing Environment

Elements of environment to Control
 Rectitude
 Ethics and Value
 Competence
 Management’s Philosophy
 Operating method
 Board of Director’s Attention and direction

Risk Assessment
 Determine the company’s objective
 Stability in each level
 Determine Company’s Potential Risks
 Options to fix such Risks

Control Activities
 All Approvals
 All Authorizations
 All Verifications
 All correction
 All Asset’s security
 Suggested duties
 Reviewed Operating Performance

Information and Communication
 Determination
 Communicated in basis of Timeframe
 Information Systems for Producing Reports
 Operation report
 Financial performance’s repor

Monitoring Activities
 Activities of Management both Upper and lower
 ISC must be implemented, Designed and Monitored
 Control all internal activities
 Measure system’s performance periodically

Points to remember
 Each level of internal control affect the people.
 The goal and objective of the firm will easily achieved by
implementing effective internal control.
 Internal Control Systems as well as internal and external
environment of the company changes always.

Responsibilities of the Management
 To established, properly documented, maintained, and
reviewed the Internal Controls in the firm.
 To provide leadership and direction in setting objectives and
assessing risks.
 To maximize the strength and to minimize the weakness.
 To supervise and ensure that Internal Controls in operation.
 To obtain internal control in training for all employees of the
company as well as including management.

Responsibilities of Employee
 To Perform all internal control activities that assigned by the
management.
 To Report significant Internal Control deficiencies to the
supervisors.