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Accounting Controls Guidebook #360124

Course Overview

Credit

Amount

CPA

Course Author: Steven M. Bragg, CPA Field of Study (CPA): Accounting

Course Description

Course publication/revision date: This course was updated on 5/9/2024.

Controls are an essential ingredient of the modern business, since they can reduce error rates, minimize fraud, and ensure that procedures are completed in a consistent manner. The Accounting Controls Guidebook reveals the controls you need for every accounting system, from billings to financial reporting, in addition to such operational areas as order processing, shipping, and receiving. Controls are separately stated for manual and computerized accounting systems. The course also addresses types of controls, control principles, the proper balance of control systems, and how to construct a system of controls. In short, this is the essential desk reference for the accountant who wants to install and maintain a well-constructed system of controls.

Table of Contents

Chapter 1 - The Accounting Controls Environment1

The Genesis of Accounting Controls	1
The Proper Balance of Control Systems	2
The Nature of Risk	3
Common Fraud Risk Factors	4
Control Principles	5
The Failings of Internal Controls	6
Preventive and Detective Controls	7
Manual and Automated Controls	7
Constructing a System of Controls	8
Special Case - Acquisitions	9
Special Case – Employee Turnover	9
Special Case – Rapid Growth	10
Control System Documentation	11
Terminating Controls	11
The Negative Impact of Policies	12
Controls Education	13
Structure of this Book	14

Chapter 2 - Order Entry Controls18

Order Entry Process Overview	18
In-Process Order Entry Controls	20
Alternative Order Entry Control Systems	23
Control System for Manual Order Entry	23
Control System for Computerized Order Entry	24
Additional Order Entry Controls – Fraud Related	25
Additional Order Entry Controls – Periodic Actions	26
Additional Accounting Policies	28

Chapter 3 - Credit Controls30

Credit Process Overview	30
In-Process Credit Controls	33
Alternative Credit Control Systems	34
Control System for Manual Credit Management	34
Control System for Computerized Credit Management	34
Additional Credit Controls – Fraud Related	35
Additional Credit Controls – Periodic Actions	35
Additional Accounting Policies	36

Chapter 4 - Shipping Controls39

Shipping Process Overview	39
In-Process Shipping Controls	41
Alternative Shipping Control Systems	42
Control System for Manual Shipping	43
Control System for Computerized Shipping	43
Additional Shipping Controls – Fraud Related	44
Additional Shipping Controls – Periodic Actions	45

Chapter 5 - Customer Billing Controls47

Customer Billing Process Overview	47
In-Process Customer Billing Controls	50
Alternative Customer Billing Control Systems	53
Control System for Manual Customer Billings	53
Control System for Computerized Customer Billings	54
Additional Customer Billing Controls – Fraud Related	55
Additional Customer Billing Controls – Periodic Actions	56
Additional Accounting Policies	58

Chapter 6 - Collection Controls60

Collection Process Overview	60
In-Process Collection Controls	62
Alternative Collection Control Systems	63
Additional Collection Controls	64
Additional Accounting Policies	65

Chapter 7 - Cash Receipts Controls67

Cash Receipts Process Overview	67
In-Process Cash Receipts Controls	71
Alternative Cash Receipts Control Systems	74
Control System for Cash Receipts	74
Control System for Check Receipts	75
Control System for Lockbox Receipts	76
Control System for Remote Deposit Capture	77
Additional Cash Receipts Controls – Fraud Related	78
Additional Cash Receipts Controls – Periodic Actions	81
Additional Accounting Policies	81

Chapter 8 - Purchasing Controls84

Purchasing Process Overview	84
In-Process Purchasing Controls	87
Alternative Purchasing Control Systems	89
Control System for Purchasing with Bids	89
Control System for Purchasing without Bids	90
Controls for Purchasing with a Computerized System	91
Purchase Order Clearing	92
Additional Purchasing Controls – Fraud Related	93
Additional Purchasing Controls – Periodic Actions	94
Additional Accounting Policies	95

Chapter 9 - Accounts Payable Controls98

Accounts Payable Process Overview	98
In-Process Accounts Payable Controls	100
Alternative Accounts Payable Control Systems	105
Control System for Manual Accounts Payable	105
Control System for Computerized Accounts Payable	106
Control System for Evaluated Receipts	108
Additional Payables Controls – Trend Analysis	109
Additional Payables Controls – Fraud Related	110
Additional Payables Controls – Periodic Actions	111
Additional Accounting Policies	112

Chapter 10 - Expense Report Controls115

Expense Report Process Overview	115
In-Process Accounts Payable Controls	117
Alternative Expense Report Control Systems	119
Control System for Manual Expense Reporting	119
Control System for Computerized Expense Reporting	119
Additional Expense Report Controls – Fraud Related	120
Additional Expense Report Controls – Periodic Actions	121
Additional Accounting Policies	122

Chapter 11 - Procurement Card Controls124

Procurement Card Process Overview	124
In-Process Procurement Card Controls	125
Alternative Procurement Card Control Systems	127
Procurement Card Control System without a Transaction Log	127
Procurement Card Control System with a Transaction Log	128
Additional Payables Controls – Fraud Related	128
Additional Payables Controls – Periodic Actions	129
Additional Accounting Policies	130

Chapter 12 - Petty Cash Controls133

Petty Cash Process Overview	133
In-Process Petty Cash Controls	134
The Petty Cash Control System	135
Additional Payables Controls – Fraud Related	136
Additional Accounting Policies	137

Chapter 13 - Receiving Controls139

Receiving Process Overview	139
In-Process Receiving Controls	140
Alternative Receiving Control Systems	142
Control System for Receiving with a Manual System	142
Controls for Receiving with a Computerized System	143
Additional Receiving Controls – Fraud Related	144
Additional Receiving Controls – Periodic Actions	145
Additional Accounting Policies	145

Chapter 14 - Payroll Controls147

Payroll Process Overview	147
In-Process Payroll Controls	149
Alternative Payroll Control Systems	154
Control System for Manual Payroll	154
Control System for Computerized Payroll	156
Control System for Outsourced Payroll	158
Control System for Cash Payroll Payments	159
Additional Payroll Controls – Trend Analysis	161
Additional Payroll Controls – Fraud Related	161
Additional Payroll Controls – Periodic Actions	163
Additional Payroll Controls – Related Activities	164
Additional Accounting Policies	165

Chapter 15 - Fixed Asset Controls167

Fixed Asset Process Overview	167
In-Process Fixed Asset Controls	170
Alternative Fixed Asset Control Systems	173
Additional Fixed Asset Controls – Fraud Related	175
Additional Fixed Asset Controls – Periodic Actions	176
Additional Accounting Policies	177

Chapter 16 - Treasury Controls179

The Cash Forecasting Controls Environment	179
The Funds Investment Control Environment	180
The Debt Procurement Control Environment	183
The Stock Issuance Control Environment	184
Additional Treasury Controls – Fraud Related	185

Chapter 17 - Financial Reporting Controls187

Financial Reporting Overview	187
In-Process Financial Reporting Controls	189
Additional Controls for Public Companies	193
Balancing Controls against Speed	194
Additional Financial Reporting Controls – Fraud Related	194
Additional Financial Reporting Controls – Periodic Actions	195
Additional Accounting Policies	196

Chapter 18 - Other Controls199

Acquisition Controls	199
Budgeting Controls	200
Budget Creation Controls	200
Budget Integration Controls	201
Summary of Budget Controls	202
Gift Card Controls	202
Information Technology Controls	203
Inventory Recordation Controls	204
Inventory Valuation Controls	205
Project Controls	206
Controls for Cost Plus Pricing Arrangements	206
Controls for Fixed Fee Pricing Arrangements	207
Controls for Internal Projects	208
Summary of Project Controls	209

Answers to Chapter Questions211

Glossary225

Index229

Course Details

Author: Steven M. Bragg, CPA

Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor’s degree in Economics from the University of Maine. He has been a two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written more than 300 books and courses, including New Controller Guidebook, GAAP Guidebook, and Payroll Management.

Publication/Revision Date: 5/9/2024

Course Exam Questions (online): 60 (multiple-choice)

Program Delivery Method: NASBA QAS Self-Study

Available Formats of Course Text: PDF or PDF plus printed copy sent in the mail

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors ID: 107615

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Identify the situations in which controls can be avoided or must be installed, and note the nature of the best controls.
Specify the process steps and controls that can be inserted into the order entry process.
Identify the procedure steps and controls used to process customer requests for credit.
State the controls used to deal with sales orders, drop shipments, back orders, and merchandise returns.
Identify the controls used in the computerized and manual issuance of invoices to customers.
Identify the controls that can be used to provide structure to the collections process.
State the controls associated with the receipt, recordation, and deposit of cash and checks.
Identify the different types of controls that can provide structure to the purchasing function.
State the controls that can be assigned to supplier invoice recordation and payments.
Specify the controls that can be inserted into the processing of employee expense reports.
Identify the controls needed to provide a secure environment for the use of procurement cards.
Specify the steps in the petty cash process flow, how petty cash can be replaced, and the controls that can be instituted for petty cash.
Recognize the controls used in the receiving area.
Define the activities needed to create a proper payroll control environment, and note the indicators of payroll fraud.
Recognize the controls used to safeguard fixed assets.
State the controls used for cash forecasting, funds transfers, stock issuances, and collateral monitoring.
Identify the process steps and controls that can be integrated into the period-end closing process, construction of financial statements, and chart of accounts.
Specify the controls that can be applied to the budgeting process and the monitoring of a project.

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