Fraud, Internal Control, and Cash Management (Essay Sample)

Fraud, Internal Control, and Cash Management
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Fraud is the process whereby an employee or a group of employees are involved in activities that bring about losses to the organization. Some of the major factors that contribute to increased fraudulent activities in an organization include; financial pressure from an employee brought about by situations from his/her personal life, the opportunity to acquire some resources from the organization illegally brought about by elements such as poor security also facilitates fraudulent activities. Other organizations also subject their employee to an unhealthy working environment such as unfair remuneration which will encourage and breed a rationalization culture in the organization.
An organization should take appropriate steps to ensure that the losses that they accrue due to fraudulent activities from their employees are dealt with effectively. Late detection of fraudulent activities may result in a collapse of the entity due to huge losses recorded over the years. Adapting an effective internal control system that will regulate and control all the activities in an organization will give out a true and fair view of the organization's operations and activities. An appropriate internal control stem should be in a position of ensuring that the organization's assets are well protected, ensuring accuracy in accounting and bookkeeping procedures and productive operations.
The principles that guide the internal control system for effective organizational management include; Document trailing which involves the use of appropriate documentation procedures such as using prenumbered documents. Appropriate physical control entails the use of high-security measures to prevent illegal access and entry to vital information and areas within the organizations. Ensuring effective human resource management practices within the organization by putting in place competent human resource managers. Segregation of duties within an organization also helps in ensuring productivity since everyone is aware of his/her responsibilities. Appropriate auditing procedures such as acquiring external auditors to help in providing a true and fair view of the organization's internal audit reports. Internal system of control may subject the employees to unwanted collisions which may bring about unnecessary conflicts.
Bank reconciliation is the process of ensuring that the organization's bank statements represent the information in the organization’s books of accounts. Bank reconciliation statements enable the organization to have a true and fair view of its financial position. The steps in preparing a valid bank reconciliation statement include; acquiring the bank records from their bankers, collecting all the organization’s business records, analyze all the organization's withdrawals and deposits with the bank, analyze the expenses and incomes from the organizations accounting book records, make adjustments in the bank statements and cash balance if there is need to do so and compare the results for reconciliation.
Some of the journal entries that result from bank reconciliation processes include the bank service charges which an organization is obligated to pay its bankers. Bank charge fees are always present in the bank statements but not available in the organization's accounting records. Another journal entry from the ban