Final answer:
A good system of internal controls over inventory is necessary to prevent theft and fraud, ensure accuracy of inventory records, and maintain accountability.
Step-by-step explanation:
A good system of internal controls is necessary over inventory for several reasons:
- Preventing theft and fraud: Inventory can be valuable, and without proper controls, there is a risk of theft or fraud. Implementing controls such as physical locks, surveillance cameras, and regular inventory audits can help deter and detect unauthorized activities.
- Ensuring accuracy of inventory records: Internal controls help ensure that the inventory records accurately reflect the actual inventory levels. This is important for making informed business decisions, avoiding stockouts or overstocks, and accurately valuing the inventory for financial reporting purposes.
- Maintaining accountability: A good system of internal controls helps assign responsibility for the inventory and holds individuals accountable for their actions. This promotes a culture of trust and discourages unethical behavior.