Essay Acct 504 - Case Study Ii - Internal Controll

1. To have a strong internal control system, a business must have good administrative controls. Administrative controls include: A. B. C. D. the reconciliation of the bank statement. the accuracy of the recording procedures. assessing compliance with company policies. maintenance of accurate inventory records.

Having internal controls is one thing, but how the company evaluates that control is a matter all by itself. Being an independent auditor, it is our job to understand an entity and

Internal control is one of the integral parts of an organization. It is a system which controls different types of risks,

There are many rules companies must follow whenever documenting financial information or any other data which is gather during any business transactions. In order for said companies to report financial information internal controls have to be put in place as companies have to adhere to certain laws and regulations. Internal controls can be defined as a process which companies follow in order to ensure all financial reporting is done in a reliable and lawful manner. Some think of it as a system which works within a system as it plays a major role on the success of a company’s accounting system. At the organizational level, internal control objectives relate to the reliability of financial

Internal controls represent an organization’s processes and procedures used to meet its goals and objectives and serve as a defense in safeguarding assets and preventing and detecting errors, fraud, and abuse. Effective internal controls provide reasonable assurance that an organization’s objectives are achieved through (1) reliable financial reporting, (2) compliance with laws and regulations, and (3) effective and efficient operations. The passing of the Sarbanes-Oxley Act of 2002, as well as the numerous corporate frauds and bankruptcies over the past decade—including some

Dentistar, Inc. was formed in 1985 to provide dental and orthodontic services to subscribers of their prepaid dental plans. This report examines the western region’s office, located in Los Angeles, and its issuance of excessive manual checks that resulted in multiple bank overdrafts. Results indicate that only minimal efforts have been made for internal control measures in this office and companywide, and that weaknesses have allowed the Finance Coordinator to embezzle funds. There are many issues to be addressed, and several remedial actions to be taken to prevent these types of losses going forward.

Though there is a general acceptance of the need for a mix of both external and internal controls to maintain ethical and responsible conduct in public service, more should be done to encourage stronger internal controls as a defense against fickle public opinion and popular trends, negative organizational pressure, as well as the ever more prevalent victim mentality. One proven way to strengthen internal controls and give a more defined sense of purpose which also provides inspiration to give service to others and sacrifice one’s own self-interests is to develop a morality based on religious values and principles. Many negative facets of modern society pose a significant threat to ethical and responsible conduct. The current postmodern trends of rejecting formerly core societal values have provided

An internal locus of control means the person believes that “they control their own fate, they tend to make more effective and healthier lifestyle choices, are more likely to follow treatment programs, and find ways to positively cope with a situation”, (Sanderson & Huffman, 2017). A person with an external locus of control believes that chance or outside forces beyond their control determine their fate.

Internal controls are necessary for organizations of any nature and particularly those that are numbers driven such as accounting, and finance. They safeguard assets, maintain records, prepare and promote financial reports and operational efficiency, adhere to management and ensure compliance with regulations. “Information systems encounter serious security threats that may arise from the weakness of the internal controls and/or the nature of the competitive environment as the need and dependency on information increases” (Hayale & Abu- Khadra, 2006). With internal controls, organizations can bring out value and not just lessen their risk. And this is where becomes applicable. Cobit as a framework ensures that internal controls are effective and efficient. Cobit is the generally accepted internal control framework for IT. (ISACA, 2016).

Internal controls, as defined by Investopedia.com, are “methods put in place by a company to ensure the integrity of financial and accounting information, meet operational and profitability targets, and transmit management policies throughout the organization.” This system works best when applied to multiple divisions and deal with inter-departmental transactions. An example of the latter may be those occurring between the originating department from where the transaction is originated, supply management, and accounts payable. These methods can be broken down between a preventative and a detective category. Preventive controls are just such: those policies and procedures that prevent an incident from occurring.

The framework describes internal control as a process designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

I was asked to give my recommendations on LJB Company’s internal control system before the company decides to go public in the future. Based on my review of the information that I have been given, the following are my recommendations for new internal controls:

Today, businesses rely mostly on technology. However, there are risks that business information systems face such as human input errors, transaction or data input that is unsuitably permitted prior to data input, and input controls that do not offer assurance that all transactions that are initially caught and recorded; these risks are all categorized as data origin risks. Business organizations combat this and other risks using General Controls and Application Controls. Please keep reading to find out what this controls are and how they are used, as well as learn about other risks that business face and their respective classes.

What is a system of internal control and what objectives is it designed to fulfil? In your view, how relevant is an organization’s culture and value system in achieving the objectives of a system of internal controls?

* Due to the unorthodox honor system of dealing with petty cash, any single employee can withdraw a substantial amount of petty cash in relative anonymity. This violates two Internal Control Principles: Physical Control and Establishment of Responsibility. It violates the Physical Control Principle because the petty cash is easily accessible with no form of physical protection of theft, and it violates the Establishment of Responsibility Principle because no single person is in charge of the Petty Cash Fund (rather everyone is). This can be remedied by assigning a custodian to be responsible for the fund, as well as creating a secure area to store said funds.