An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies.
(a) Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.
1. Separating the responsibility for a transaction between two or more individuals or departments will help prevent someone from creating a fictitious invoice and paying the money to herself or himself.
2. Separation of for assets from the custody over assets will likely increase theft and fraud.
3. The primary objective of internal control procedures is to grow the assets of the business.
4. Separation of recordkeeping for assets from the custody over assets will not prevent collusion between two or more employee to commit fraud.