What would be examples of some internal control and their effect on the financial statements?

Question

What would be some general internal controls in a ice cream store?

Answer 1

Examples of Internal Control Activities include:

• Top level reviews of actual performance - Management should track major agency achievements and compare these to the plans, goals, and established objectives.
• Controls over information processing - A variety of control activities are used in information processing. Examples include edit checks of data entered, accounting for transactions in numerical sequences, comparing file totals with control accounts, and controlling access to data, files and programs.
• Physical control over vulnerable assets - An agency must establish physical control to secure and safeguard vulnerable assets. Examples include security for and limited access to assets such as cash, securities, inventories, and equipment that might be vulnerable to risk of loss or unauthorized use. Such assets should be periodically counted and compared to control records.
• Segregation of duties - Key duties and responsibilities need to be divided or segregated among different people to reduce the risk of error or fraud. This should include separating the responsibilities for authorizing transactions, processing and recording them, reviewing and approving the transaction, and handling any related assets. No one individual should control all key aspects of a transaction or event.

Answer 2

I used to work for a computer hardware company. Before we launched an exciting new product, the sales people would be all over marketing trying to get info and sell it. Some salesreps would "sell" it before it even got to market. So the company had internal controls to make sure that products were not given "item numbers" until the thing was actually ready to ship, and invoices could not be entered without valid item numbers. So the crazy salespeople couldn't book orders before there was a firm, defined, available product. This prevented the financial statements from being overstated by overzealous sales people.