Such segregation, as is true in the case of authorization controls, limit the ability of individuals, solely on their own initiative, to successfully engage in fraudulent activities involving organizational assets or assets under the control of an organization.
Limited access restricts the opportunities that individuals have to commit illegal acts associated with an organization's assets or assets controlled by an organization. As an example, establishing responsibility for theft from a cash register accessible to 10 employees is far more difficult than is the case internal controls limit access to the cash register to two designated cashiers.
It is important to remember that, while an organization establishes internal control procedures for each operation wherein assets are at risk, the several sets of internal control procedures are a part of the larger organizational system of internal controls. Thus, the integrated functioning of internal controls for cash transactions, materials acquisition, vendor payments, inventory management, and the myriad other assets protection functions in an organization creates a unified whole for the protection of an organization's assets or assets controlled by an organization (Heiman-Hoffman, Morgan, and Patton 75-77). The following internal control policy of the Halliburton Company illustrates a comprehensive organizational system of internal controls.
Authorization. The only transactions to be entered into by the Company are those which are executed in accordance with management's specific authorization or established, formalized policies and procedures.
Approval. No transaction will be recorded in the accounts of the Company unless it is within the scope of written policies and procedures or is specifically and formally approved by an appropriate and designated employee. Such approval requires the determination that the transaction (i) has been authorized in accordance with this Corpor...
The Use of Internal Controls in Accounting. (1969, December 31). In LotsofEssays.com. Retrieved 23:11, October 24, 2016, from http://www.collegetermpapers.com/viewpaper/1303578657.html