This document discusses objectives, risks, internal controls, and fraud in businesses. It defines key terms like objectives, stakeholders, mission, risks, controls, and internal controls. Businesses implement internal controls and divide duties to help ensure they achieve their objectives, protect assets from theft or fraud, and maintain reliable financial information. Fraud is more likely when opportunities exist, pressure is present, and individuals are able to rationalize their actions. Different types of controls like preventative, detective, corrective, and accounting controls are used to discourage undesirable events.

1. Objectives, responsibilities and control of
business.
Module 15

2. Overview
 Objectives
 Risks
 Internal control
 fraud

3. Objectives pg 477
 ‘Stakeholders’
People that have a stake or interest in the progress of the organisation,
 Mission
Main objectives of the organisation.
From the mission all secondary objectives can be determined and
strategies can be devised.

4. Secondary Objectives pg 478
 Example:
Good relationships with customers
Good working conditions for employees
In South Africa Secondary Objectives have changed over time
 Concern for the environment
 Ethics and combating crime
 HIV/AIDS education

5. Risks of operating a business pg 479
 Risk:
Possibility that something may cause damage; harm or loss.
Businessman need to assess:
1. Type: What risks?
2. Frequency: How often?
3. Extent: How big?
4. Acceptability: Are the risks acceptable?

6. How do businesses ensure that they
achieve their stated objectives? Pg 480
 Control:
Any action taken by the management of the business to increase the
likelihood that the established objectives and goals are achieved.
‘Accountability’ NB
 Managers are accountable if objectives are not met.
 It’s possible to delegate a task to another person; it is never possible to
delegate responsibilities.

7. Internal Control pg 481
‘Prevention is better than cure’
Internal Control:
Policies and procedures that have been put in place
in an organisation to ensure that the organisation
works towards its stated objectives.

8. Reasons for control measures pg 483
Procedures are implemented to ensure that:
 Assets and income are protected from theft or fraud.
 Employees comply with policies, procedures, laws and
regulations.
 The resources of the business are used effectively, economically
and efficiently.
 Financial information is reliable.
 The members of the organisation work towards the achievement
of the goals of the business.

9. Fraud pg 484
 Dictionary description:
deception, scam, con, swindle, deceipt.
 Difference between fraud and error:
There is an intention to commit a crime and to
deceive others in covering up the crime.

10. Fraud triangle pg 486
 For fraud to take place there are
normally 3 factors present:
1. Opportunity to commit
fraud
e.g. Person is working on their own.
2. The Person will rationalise that they are entitled to an incentive
e.g. ‘I should be paid more’ or ‘I work to hard’
3. Fraud committed due to pressure
e.g. Personal debt or family tragedy

11. Types of controls pg 487
 Preventative:
Prevent an undesirable event taking place.
e.g. Security guard or burglar alarms
 Detective:
Detecting an undesirable event after it has occurred.
e.g. Fire Alarm or security video
 Corrective:
Discourage an undesirable event taking place
e.g. No smoking signs
 Accounting controls
Designed to maintain a reliable method of processing and
communicating financial information to safeguard the business against
fraud or error.

12. Setting up a good system of internal
accounting control pg 488
 Division of duties
The work of one employee serves as a check for another.
 Proper Documentation
e.g. Sign vouchers
 Proper authorisation
When items are purchased get authorisation from someone with
responsibility.
 Proper recording and follow up
Transactions must be entered timeously in journals and ledgers

13. Activities
5;7;8;9;15;16-18