MEPX
Chapter 9 of 10All chapters
  1. 1What accounting is for
  2. 2The accounting equation
  3. 3The three statements
  4. 4Accruals and matching
  5. 5Profit against cash
  6. 6Bookkeeping in practice
  7. 7Reading the numbers
  8. 8Costs
  9. 9Controls and audit
  10. 10Reading a company report

Chapter 9 of 10

Controls and audit

Preventing error and fraud.

Separation of duties

The person who approves a payment should not be the person who makes it, and neither should reconcile the account. Most small-business fraud exploits one person holding all three.

  • Approval limits and a second signature are cheap and effective.
  • Regular independent reconciliation catches both errors and theft.

Audit

An audit gives an opinion on whether statements fairly represent the business, based on samples. It is not a guarantee that nothing is wrong, which is a common misunderstanding.