Identify the principles of internal control activities
1. Segregation of duties: This principle requires that a single individual should not be responsible for all aspects of a transaction. Different individuals should be assigned different roles and responsibilities to ensure that no one has too much power or control over one aspect of the business.
2. Authorization and approval: All transactions should be authorized and approved by the appropriate person or department before they are processed. This ensures that all transactions are valid and that there is accountability for all actions taken.
3. Recording and documentation: All financial transactions and other important events should be accurately recorded and properly documented. This includes maintaining proper records of all receipts and disbursements, as well as records of all other events that could impact the company's financial well-being.
4. Physical and environmental controls: Physical controls refer to measures designed to secure the company's assets, such as locks, alarms, and security cameras. Environmental controls refer to measures designed to ensure a safe and comfortable work environment, such as proper lighting, temperature control, and ventilation.
5. Reconciliation and review: Regular reconciliation and review of financial and other important records is critical for identifying errors and discrepancies. This principle requires that management review financial reports, bank statements, and other records regularly to ensure that all information is accurate and up-to-date.
6. Continuous monitoring: Continuous monitoring refers to ongoing monitoring of activities and transactions to ensure that they are conducted in compliance with policies and procedures. This includes monitoring financial transactions, employee activities, and other important business processes for signs of potential fraud or other irregularities.