Internal Control Case Study Essay

Physical, mechanical and electronic controls are used to safeguard assets and enhance the security of them (Weygandt, 2009). Examples would be keys only assigned to cash office personnel, the code on the vault, time clocks and video surveillance. Independent internal verification is way of double checking the information reported by employees. For example, managers are not directly associated with the accounting office and they check the daily work completed by accounting office employees on a weekly or semi-weekly basis to ensure that all reports and numbers

Security cameras will be placed strategically around the shop and warehouse and will be watched by employee number 4, he will overlook all security cameras in the warehouse on the weekends when stock will be transferred from the warehouse to store. If any theft occurs during the week when employee 4 is not present, the alarm system installed in the warehouse will sound and 2 men from Sniper (the security service in use) will go to the warehouse to see whether the thieves are still there, they will then report to the owner (you). On weekdays employee 4 will watch the cameras at the store, if any theft does occur from either the employees or customers, employee 4 will detain the thief until the police arrive to take him/her away. A log book will be handled by the manager, when the driver or any employee (transfers stock from warehouse to store) chooses to use company vehicles they will record their check in times, destination and time brought back in the log book, any changes made to the vehicle i.e. Fill up with petrol, must also be recorded in the log book. When vehicle expenses are claimed, one method of substantiating is to maintain a log book. A log book is a written record of your business use of a vehicle over a period

Internal control has different control principles, establishing responsibility focuses on allotting different tasks to a concerned person, like each sales person should have an individual sales register. Different controls on physical, mechanical and electronic should be exercised as this will help in reducing the unauthorized use of different resources, this is essential for safeguarding assets and

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

However, one person acting as accountant, treasurer and controller places an imbalanced access to the companies invoice process, ordering process, check cashing process, and he alone decides what of these activities gets recorded in the Company books. We recommend that two other employees be assigned the respective Treasurer and Controller duties.

An accounting system affords companies the luxury to be able to use their financial information whenever they need it, by it being store at a convenient location. There are three divisions within the accounting method; analysis, design, and implementation must be complemented with a system of control. This control is another system within a system that is design to ensure success of the accounting systems. Internal controls keeps business safe, preventing someone from committing fraud or abusing the system; this way the information that is store in the system is kept accurate and reliable. Part of internal controls is who are responsible; physical, mechanical, and electronic controls; there must also be segregation of duties, and independent internal confirmation.

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.

Therefore, money handling duties are separated from the record keeping duties when internal control of cash is needed (Averkamp, n.d.). In a typical setting, there should be a mailroom clerk who retrieves the mail, which is sent to the accounting department, who records the cash payment, then sent over to a controller, who finally and should immediately place into the bank for safekeeping. Internal control consists of methods and measures adopted within an organization to safeguard its assets, encourage employees to follow company policy, promote operational efficiency, and ensure the accuracy and reliability of its accounting records (Nobles, Mattison, & Matsumura, 2014). There are five components of Internal Control CRIME: Control procedures, Risk assessment, Information system, Monitoring of controls, and Environment. Control procedures are the policies enforced in company’s infrastructure. Risk assessment deals with the company’s ability to process and analyze their data. Information system is the technology that limits individuals from falsifying data records. Monitoring controls is simply supervising that financial data are accurately being recorded. Control procedures are those that set the tone of the organization such as values and best practices (Mercer University,

The internal control of physical controls is also being utilized by LJB Company. Physical controls “relate to the safeguarding of assets and enhance the accuracy and reliability of the accounting records” (Kimmel, Weygandt, & Kieso, 2013, p. 342). The accountant secures the paychecks in a safe in his office before he leaves for weekend. By securing the paychecks in the safe, other individuals are unable to get to the checks during the weekend. Although there are improvements that need be made to the paycheck process, locking the paychecks in a safe over the weekend is a strong internal control that protects a valuable asset.

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.

LJB Company has asked the accounting firm to evaluate their system of internal controls because of the plan to go public in the near future. The president wants to be aware of any new regulations required of his company if they go public. The current system of internal controls was explained to the accounting firm. Under SOX Sarbanes-Oxley Act of 2002, all public traded U.S. corporations are required to maintain a sufficient system of internal controls. In order for this to be implemented all Corporate Executives and

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.

“Internal controls are policies and procedures put in place to ensure the continued reliability of accounting systems” (Ingram 2017). WorldCom’s attempts at maintaining internal controls are less than favorable. Segregation of duties enables the division responsibilities to ensure that no employee completes two similar tasks. The CEO’s monitoring of WorldCom’s financial processes shows that the company has a lax segregation of duties, which makes it easier to commit fraud. Access controls protect financial data from unauthorized access, however, WorldCom’s extent is password-protected computers. No access inventories are taken to monitor employee usage, so there is no trail of when employees are doing during work.

Internal control is defined as a process affected by an organization 's structure, work and authority flows, people and management information systems, designed to help the organization accomplish specific goals or objectives. It is a means by which an organization 's resources are directed, monitored, and measured. It plays an important role in preventing and detecting fraud and protecting the organization 's

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