Cash Flow and Internal Controls

Maya's business is booming. Sweet Rise Bakery loved her work, and now three more clients have signed on. But her accountant sat her down for a serious talk: "Maya, your business is growing faster than your controls. One mistake, one missing check, and things could go very wrong very fast."

Maya needs to build a proper internal control system. That is where you come in. For each COSO element, evaluate two options and decide which is stronger, or identify the gap in a control Maya already has.

Maya and Jordan are settled into the new office. But Jordan has been reviewing their setup and found situations that do not look right. He cannot name exactly what is wrong, but something feels off. Help him identify which internal control element is missing and what risk it creates.

Maya's income statement shows a profit. But her bank account feels emptier than she expected. Her accountant hands her the Statement of Cash Flows for the first time. "Maya," she says, "net income tells you what you earned. This tells you where the cash actually went."

Now an investor is looking at Maya's numbers. Help her understand what the statement reveals from an investor's perspective.