Evaluating The Internal Control System

The design and implementation and objectives of company controls are not adequate to meet the control objectives. The control environment control objective is ineffective. This control objective lacks a written policy on ethical conduct, is lacking oversight from the board of directors and audit committee, lacks a consistent style and philosophy from management, and lacks a strong commitment to competence. The risk assessment control objective is effective but lacks any antifraud program and controls. The information and communication control is ineffective. A virus has been detected and is affecting the files of the company. This control is lacking a strong IT department. The general controls financial reporting control objective is effective but is weak in detecting or preventing material misstatement. The monitoring control objective is ineffective; this control has need of an internal auditor.

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.

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

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 are to be an integral part of any organization's financial and business policies and procedures. Internal controls consists of all the measures taken by the organization for the purpose of; (1) protecting its resources against waste, fraud, and inefficiency; (2) ensuring accuracy and reliability in accounting and operating data; (3) securing compliance with the policies of the organization; and (4) evaluating the level of performance in all organizational units of the organization. Internal controls are simply good business practices (Strauss, 2003). And, since internal controls can have many more meanings in the world of accounting, the more we understand what were dealing with, the better we can analyze internal

Internal controls are the methods used in businesses to examine the assets, minimize errors, prevent fraud , and to assure management policies enacted. accounting controls also provide a safeguard for the company assets by accurate financial records. The internal controls are intended to provide certified transactions that are recorded in the financial statement preparations.

Under the Security Act of 1933 and 1944, any individual that willfully filed untrue statements should be penalized. Auditors acting behalf of the public’s interest should make sure the company’s financial statements are not misleading. All the testing and auditing procedures are to verify that the number on the financial statements, and audit testing should be supported by substantial evidence. When auditors took their responsibility for and but did not show their competence for work, they should be heavily fined because their carelessness resulted the investors making a bad decision. Furthermore, if the auditors did not take their responsibility and showed no work to support their opinions should be charged as gross negligence with a heavy fine and license taken away. If it comes down to fraud, auditors should definitely face criminal charges along with their auditing company, and their license should be taken away

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.

These situations emphasize the need for organizations to have good systems of internal control. Internal control consists of all the related methods and measures adopted within an organization to: 1. Safeguard its assets from employee theft, robbery, and unauthorized use. 2. Enhance the accuracy and reliability of its accounting records. This is done by reducing the risk of errors

The internal controls of a company show the extent of adherence to accounting standards and internal auditing standards as postulated by the IASB. In the case of Smackey Dog Foods, we realize that there are so many issues pertaining internal controls. The company thus has hired external auditors to perform an audit of its internal operations to reveal all the perceived weaknesses in internal controls and provide recommendations for improvement.

Internal controls can be taken as any action taken by an organization to help enhance the likelihood that the objectives of the organization will be achieved. Every corporate body has a policy to maintain an effective internal control mechanism relating to its financial statements and financial reporting processes, internal and financial reporting principles, policies and systems, independent auditor qualification and independence, internal audit function and independent auditors ' performance, compliance with legal, regulatory, corporate governance requirements (Kim, 2004). The internal control mechanisms performed under the governance and organizational structure established by the company’s board of directors and senior management and in which all the individual employees of the company must take part in. This assists in ensuring proper, efficient and effective performing of the company’s activities in accordance with the management’s strategy and policies and applicable laws and regulations and to ensure the integrity and the reliability of the accounting and financial system and timeliness and accessibility of information in the data system (Kim and Nofsinger, 2007).

Auditing is all about assessing the financial statements of a company in order to obtain reasonable assurance that they are prepared in accordance with the appropriate conceptual frameworks. The financial statements must give a true and fair view therefore auditors are responsible in detecting if there are risks of material misstatements caused by intentionally misstating or omitting items. Auditors must follow all ethical principles and should adhere to auditing standards in order to have an objective audit opinion. It is essential that they remain independent and free of influence from their client. They must have control over the process, in case the client wants to hide something that affects their company adversely.

Internal Control is systems and controls that are implemented in a business to ensure that the integrity of information and prevent theft and fraud of the company’s cash and assets. This helps to ensure the legal Compliance and provide accurate information efficiently.

Effective internal controls protect a company’s assets, maintain compliance, improve operations, prevent fraud, and promote accuracy in financial reporting. In 1992 the

Internal auditor, should be the eyes and ears of the company to combat fraud. As fraud becomes a growing problem to every company nowadays no matter what size the organization is, the risk of fraud is like a storm that could wipe the company out dry at any given time. Most companies have strategically strengthen its internal control and corporate governance to effectively mitigate fraud as it is becoming a necessity to protect the company from the perpetrators through an internal audit function. This is consistent to Flostoiu (2012) research conclusion that the excellent way to prevent fraud is by internal control and evaluate consistently to ensure internal controls remain effective, as organization with successful implementation of internal audit programs is more audit-ready and more equipped to detect fraud, as internal audit function is becoming extremely significant towards identification of fraud indicators (p.27). Nicolaescu (2013) determined the organization’s internal audit is a corporate governance structure’s important part and the internal auditor’s abilities to conduct “fraud work” (p.110). In response to the growing concern of fraud, the Auditing Standard Boards issued Statement on Auditing Standards (SAS, 2002) No. 82: Considerations of Fraud in a Financial Statement Audit, which requires auditor to strategically accomplish the audit and identify the risk of material misstatement due to fraud or error