đź“… Thursday, May 23rd, 2024
All men have a sweetness in their life. That is what helps them go on. It is towards that they turn when they feel too worn out.
— Albert Camus
MGT011A Lecture: internal control and cash
- fraud: intentional deception for personal gain
- embezzlement of cash
- theft of assets
- filing false insurance claims
- financial statement fauld
- fraud triangle: three factors combined motivates fraud
- pressure, e.g., workplace metrics
- opportunity, e.g., possibility of get away
- rationalization, e.g., thinking that it’s okay
- Enron scandal was a massive fraud that resulted in many changes in the industry. The CFO used mark to market accounting (journal forecasted gains of deals before the revenue is actually made), and additionally moved the losses from deals to special companies.
- Internal controls refer to processes and measures stipulated by the management that ensure the trustworthiness of accounting data and protect assets from fraud. They aim to reduce and detect errors.
- The COSO (Committee on Sponsoring Organizations) framework help companies’ develop internal controls by identifying five aspects:
- control environment
- risk assessment
- control activities: establish policies and procedures
- information and communication
- monitoring activities
- segregation of duties: no single person should have enough permissions to commit fraud all by themselves, e.g., separate the roles of transaction authorization, custody of merchance, and recording of orders