Question 1 of the 2011 Examination Paper The success or failure of an entity depends on its system of controls both accounting and administrative. Identify and discuss some of the key factors of the internal control systems of an organization with which you are familiar. Internal Control is an integral process that is effected by an entity’s management and personnel and is designed to address risks and to provide reasonable assurance that in pursuit of the entity’s mission, the following general objectives are being achieved: * Executing orderly ethical, economical, efficient and effective operations - the operations have to be well organized, methodical, and consistent with the organizations’ missions; * Fulfilling …show more content…
Administrative Controls are all the methods and procedures that facilitate management planning and control of operations; whereas Accounting Controls are all the methods and procedures that authorize transactions, safeguard assets, and ensure the accuracy of the financial records. Internal control consists of five interrelated components: * Control environment * Risk assessment * Control activities * Information and communication; and * Monitoring Internal control is designed to provide reasonable assurance that the entity\s general objectives are being achieved. Therefore clear objectives are a prerequisite for an effective internal control process. The control environment is the foundation for the entire internal control system. It provides the discipline and structure as well as the climate which influences the overall quality of internal control. It has overall influences on how strategy and objectives are established , and control activities are structured. The entity would be required to develop an appropriate response to risk as it seeks to achieve its mission and objectives. The major strategy for mitigating risk is through internal control activities. Control activities can be preventive and/or detective. Corrective actions are a necessary complement to internal control activities in order to achieve the objectives. Control activities and corrective
This part of the plan works to tie an owner to a particular risk and ensure that resources are immediately made available to respond to the risk. Once these details are documented, they then become the basis for the risk response plan.
Overall Strength: in general, the article provides structure to a concept that is very intangible by: (a) describing the nature and the functions of control; (b) segregating the MCS into categories: core control system, organizational structure, and organizational culture; (c) illustrating how to apply the control model (satisfied my approach) (d) provides a basis for designing and evaluating the system. The manner, in which the model is presented, with its use of figures, further emphasizes the structure of the model. See below on further emphasis on parts (a) -(c).
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,
(TCO 5) Internal Controls are required to safeguard assets and to ensure ethical business practices. (1) Identify and explain the reason for any two of the five components of internal control (10 points) and (2) provide examples of how your two selected components of internal control will meet the goal of safeguarding assets and promoting ethical business
The first component mentions, control environment sets the tone of an organization, influencing the control consciousness of its people, (Cleverly, Song, & Cleverly, 2011). The authors mention of this rule being the foundation for all the components providing discipline and structure for all other internal control components. The next interrelated internal control is risk assessment is the entity’s identification and analysis of relevant risks to achievement of its objectives, forming a basis for determining how the risks should be managed, (Cleverly, Song, & Cleverly, 2011). Then, there is the information and communication are the identification, capture, and exchange of information in a form and time frame that enable people to carry out their responsibilities, (Cleverly, Song, & Cleverly, 2011). This is very helpful for health care organizations to implement and follow through carefully in their departments and especially billing and coding. The last internal control rule states, monitoring is a process that assesses the quality of internal control performance overtime, (Cleverly, Song, & Cleverly, 2011). These internal controls related to the corporate compliance program are all impertinent to health care
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
The Committee of Sponsoring Organizations (COSO) defines internal control as a process, effected by and entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the reliability or financial reporting, the effectiveness and efficiency of operations, and compliance with applicable laws and regulations. (Louwers, Ramsay, Sinason, Strawser, & Thibodeau, 2015). Internal Control helps entities achieve important objectives and sustain and impose performance. A properly
Internal controls prevent errors and irregularities from happening. If errors or irregularities do happen to occur internal controls will help ensure that they are detected in a timely manner. Internal controls also encourage adherence to prescribe policies and procedures. Internal control are also put into place in order to protect employees by outlining tasks and responsibilities, providing checks and balances, and also from being accused of misappropriations, errors and irregularities.
It is defined as all the forces or conditions that are available within an environment that affects an organization and business. It is also known as controllable factors because business can control them. The internal environment deals with the management of resources like human resources, physical resources, technology, monetary resources and others that constitute the organization in order to implement or execute a strategy. Internal environment also includes culture and other intangible aspects like teamwork, coordination, efficiency level of employees, employee’s salaries and monitoring costs. The strategy for competition should also be in sync with the internal resources especially the internal environment.
The control environment is what sets the tone for an organization and is the foundation for all other components of internal control. It provides discipline and structure and reflects the ethical values, integrity and competencies of the organization. The control environment is very important to effective internal control over financial reporting to an audit client like WorldCom, because good designs can prevent and detect frauds and errors. But because WorldCom had such a poor control environment, the company would require more testing for an audit. This shows that the board did not exercise oversight responsibilities over financial reporting or internal controls.
The framework describes internal control as a process designed to provide reasonable assurance regarding the achievement of objectives in the following categories:
1. Coordination. The size of modern organisations is quite large. A large amount of capital and large number of people are employed in them. This complicates the problem of control as there are many units producing and distributing different products. In order to coordinate their activities, an efficient system of control is necessary.
Effective internal controls protect a company’s assets, maintain compliance, improve operations, prevent fraud, and promote accuracy in financial reporting. In 1992 the