Running Head: Controls for Inflow

Internal Controls for Cash, Sales,

Accounts Receivable, Inventory, and Production

Building a good fraud prevention program is a difficult task. Accountants and auditors have often been exhorted to be the leaders in fraud prevention by employing their skills in designing “tight” control systems. This strategy is, at best, a short-run solution to a large and pervasive problem (Louwers, et. al., 2007). Control systems limit trust; therefore, accountants and auditors must be sensitive to the needs of the business by installing controls that will prevent or detect fraud without impeding business activities. Effective long-run prevention measures are complex and difficult, involving the elimination of the causes of fraud by mitigating the effect of motive, opportunity, and lack of integrity (Louwers, et. al., 2007). When external auditors perform the audit of financial statements, they must obtain an understanding of the company’s control environment, which relates to management activity in the company.
Cash
An important feature of internal control is the separation of the duties and responsibilities of transaction authorization, record keeping, custody of, or access to, assets, and reconciliation of actual assets to the accounting records (Louwers, et. al., 2007). The key to integrity in business is “accountability,” that is, each person must be willing to put his or her decisions and actions in view. Many organizations begin the accountability process by publishing codes of conduct; some codes are simple others are elaborate. Employment practices in the hiring and firing process are also important, such as completing an extensive background check on prospective employees. The employee background check is mandatory as cash is the primary target of employee fraud and consequently the inherent risk for cash is generally