...Evaluating Internal Control ACC/544 January 17, 2011 Professor – Robert Cornett Abstract The Sarbanes-Oxley Act of 2002 requires an audit of management’s assessment of internal controls for publicly traded companies. In addition, the evaluation of a company’s internal control system is to assess control risk to give auditors a basis for planning the audit and to provide information useful to management to meet the company’s control mission. Five basic components of the internal control system and three evaluation phases help auditors to validate the complete internal control system. The data are best quantified with the use of an internal control checklist (Louwers, Ramsey, Sinason, & Strawser, 2007). Internal controls represent safeguards that protect a company’s business operations and financial information. Business owners are typically responsible for developing and implementing internal controls for a company. Owners can use internal or external audits to evaluate the effectiveness of internal controls. This evaluation normally follows a standard process of measuring the company’s business operations and financial information (Vitez, 2009). Interview Management Management interviews allow auditors to understand the mindset of business owners and other managers in the company. Interview questions include why the owner created certain internal controls, what the controls are for, do managers understand the purpose of the controls and what...
Words: 872 - Pages: 4
...Academia.edu Log InSign Up We're trying Google Ads to subsidize server costs. If you are logged in, you won't see ads. Hover to learn more. pdf An Evaluation of the Effectiveness of Public Financial Management Syste… 8 Pages An Evaluation of the Effectiveness of Public Financial Management System being used by Government Departments in Zimbabwe. (2000 – 2011) Uploaded by Donnelie Muzividzi Files 1 of 2 Views 3,402 connect to download READ PAPER Academia.edu An Evaluation of the Effectiveness of Public Financial Management System being used by Government Departments in Zimbabwe. (2000 – 2011) Download Research Journal of Finance and Accountingwww.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)Vol.4, No.4, 201320exodus from the public sector and from Zimbabwe impacted negatively on the effectiveness of PFMS andaccountability systems, threatening day to day operations from the reform.Some human resources existed but not adequate in numbers and quality to perform some critical functions andoptimal utilization largely due to lack of working facilities.The shortfall has been found to have two dimensions: the technical dimension and the governance dimension. Onthe technical dimension, the effectiveness of the PFMS has been reduced due to failure to maintain the systemand inability to cope with number of digits due to hyper inflation. On the governance dimension, some existingregulations and procedures were not followed...
Words: 3338 - Pages: 14
...The International Journal of Digital Accounting Research Vol. 1, No. 1, pp. 47-68 ISSN: 1577-8517 Risks and Controls in the Implementation of ERP Systems Severin V. Grabski. Michigan State University, U.S.A. grabski@pilot.msu.edu Stewart A. Leech. The University of Melbourne, Australia saleech@unimelb.edu.au Bai Lu. Colonial Mutual Group, Australia blu@colonial.com.au Abstract. The implementation of ERP systems has been problematic for many organizations. Given the many reports of substantial failures, the implementation of packaged ERP software and associated changes in business processes has proved not to be an easy task. As many organizations have discovered, the implementation of ERP systems can be a monumental disaster unless the process is handled carefully. The aim of this study is to identify the risks and controls used in ERP implementations, with the objective to understand the ways in which organizations can minimize the business risks involved. By controlling and minimizing the major business risks in the first instance, the scene can be set for the successful implementation of an ERP system. The study was motivated by the significance, for both the research and practice communities, of understanding the risks and controls critical for the successful implementation of ERP systems. Following the development of a model of risks and controls, a field study of an ERP system implementation project in an organization was conducted to provide a limited test of the model...
Words: 8803 - Pages: 36
...that organization have lost five percent of their annual revenue each year because of employee fraud. Every organization needs to have a plan in places for fraud detention. In preventing fraud in the work place, a good strategy for any organization is to implement internal control. These are plans; programs and procedures put in place to safe guard the company assets, and ensure the integrity of its accounting records. As prevention fraud is much easier than recovering losses after a fraud has been committed. This study will focus on the case of Stanford Financial Group Company fraud in which Robert Allen Stanford, chairman of Stanford International Bank (SIB), was involved in a Ponzi scheme. Stanford was convicted of orchestrating a 20-year investment fraud scheme in which he misappropriated $7 billion form SIB to finance his personal businesses. The Stanford Financial Group claimed to have pulled in retail, wealthy and commercial investors from 136 countries on six continents. Lopez and Kuhrt was aware of what Stanford was doing but kept the information hidden from the public and from almost all of Stanford’s employees for they would not be able to discovery what was going on. The chief accounting Officer Gilbert T. Lopez Jr., were also involved in the fraud. Both Gilbert T. Lopez Jr., and Kuhrt was aware of the scheme and neither one of them came forward with the information. Doing the trail, more...
Words: 1323 - Pages: 6
...HITTING THE ROAD Internal control is an action plan that includes policies, procedures and method that are created and used by the business to monitor and control business activities. Internal controls do not provide guarantees, but they lower the company’s risk of loss. An effective internal control helps a department to protect assets, ensure reliable accounting, promote efficient operations and urge adherence to company policies. Binary Cafe also access internal control to minimize the risk of fraud and theft. One of the principles of internal control that used by the company is establish responsibilities. Proper internal control means that responsibility for a task is clearly established and assigned to one person. When a problem occurs in a company where responsibility is not identified, determining, who is fault is difficult. For example, in this cafeteria, they have around 2 to 3 cashiers because they have a shift. Cashier will collect and calculate the profit for the whole day and will give to the clerk. The cashier can be more than 1 person because they have not enough staffs or workers to handle all the jobs. Most of us have waited at a retail counter during a shift change while employees swap cash drawers. Separate record keeping from custody of assets. Person who control or access to an asset must not keep assets accounting records. This principle reduces the risk of theft or waste of an asset because the person with control over it knows that...
Words: 811 - Pages: 4
...Swinton & Associates Accounting Firm 6711 14th Street Washington, DC 20310 202-678-0076 November 27, 2011 Mr. John Jones: President LBJ Corporation 100 E Main Street Alexandria, VA 22303 First and foremost, thank you for selecting Swinton & Associates Accounting Firm to evaluate LBJ’s Internal Control Systems. I realize that there are a plethora of accounting firms that you could have chosen therefore; I wanted to express my sincere gratitude for trusting our firm to assist you with your needs. With that said, I have carefully assessed the information you provided to my colleague at the initial meeting regarding LBJ’s posture for going public. I have outlined the key areas of concern and have broken the areas down into the following categories: 1. Internal Control Requirements - After numerous corporate scandals came to light in the early 2000s, Congress addressed this issue by passing the Sarbanes-Oxley Act of 2002 (SOX). Under SOX, all publicly traded U.S. corporations are required to maintain an adequate system of internal control. Corporate executives and boards of directors must ensure that these controls are reliable and effective. In addition, independent outside auditors must attest to the adequacy of the internal control system. Companies that fail to comply are subject to fines, and company officers can be imprisoned. SOX also created the Public Company Accounting Oversight Board (PCAOB), to establish auditing standards...
Words: 1466 - Pages: 6
...completed on February 8th, 2013, and there are some concerns about the current internal control of the company. Our recommendations of the new internal control our based on Sarbanes Oxley Act; we believe this information will serve its purpose to fit the needs of LBJ Company. New Internal Control Requirements: According to the investigation, we reviewed the following areas of internal control that need to be under the Sarbanes Oxley standards: * Human Resource Control * Segregation of Duties * Establishment of Responsibilities * Physical Control * Proper Documentation Procedures * Independent Internal Verification Evaluation of Current Internal Control: There are two areas that have positive standards in the LBJ Company: * Transaction management * Risk assessment We reviewed some of the internal control within your company that shows a positive impact. We identified that the company uses pre-number invoices for cash to be posted by invoice number. LBJ’s risk assessment identified that there are certain risks that could have some negative effects if these risks are not managed properly. We do not recommend purchasing an indelible ink machine to print checks because it would violate segregation of responsibilities, which states “the responsibility for record-keeping for an asset should be separate from the physical custody of that asset” (p. 228). Internal Control Revisions: Below is a chart of revisions that must be met by Sarbanes Oxley...
Words: 517 - Pages: 3
...have may influence student success. Many students face considerable difficulty in successfully completing accounting. The amount of material typically covered is substantial and the course requires of the student a significant increase in motivation, analytical ability, and academic effort over the usual principles. Factors that are beyond the control of students but may affect their academic performance include institutional issues such as fast changing environment, large class size and heavy teaching load for the instructor. There may also be limited availability of supplemental instruction or tutoring assistance. All of these factors may adversely affect the probability of student success in understanding accounting. The purpose of this study is to investigate some of the factors that may influence student academic performance in accounting. Identifying the factors that are positively related to performance should enhance faculty understanding of the problems related to student failure in accounting. In addition, identifying these factors could result in accounting departments developing more effective curriculum, enrollment policies, and prerequisites for the intermediate accounting subject. STATEMENT FO THE PROBLEM The study wants to know the different factors that influence the 2nd year accounting students’ academic performance towards their accounting subjects Specific, the study attempts to: 1. Determine the...
Words: 1000 - Pages: 4
...U05A1 Atha Executive Plan Human Resource Functional Area Accounting and Finance Functional Area Debra Marzett Instructor: Crystal Neumann Spring Quarter 2013 BUS3011 May 10, 2013 CONTENTS Executive Summary 4 Purpose Statement 5 Human Resource 5 Accounting and Finance 5 Goals and Activities 6 Human Resource 6 Accounting and Finance 7 Organizational Structure 8 Human Resource 8 Accounting and Finance: 9 Interview Questions 10 Human Resource Generalist 10 Accounting and Finance Analyst 11 Performance Standards 12 Human Resource 12 Accounting and Finance 13 Conclusion 14 References 15 Appendix I 16 a. Strategic Alignment Worksheet: Human Resource 16 1.0 Goals and Activities: 16 2.0 Interview Questions: 17 3.0 Purpose Statement: 18 4.0 Performance Standards: 18 b. Strategic Alignment Worksheet: Accounting and Finance 19 1.0 Goals and Activities 19 2.0 Interview Questions: 20 3.0 Purpose Statement: 20 4.0 Performance Standards: 20 Appendix II 22 a. Human Resource Organizational Chart: 22 b. Accounting and Finance Organizational Chart 23 Executive Summary The project is an executive plan prepare for Atha Corporation owner Mary Atha whose goal is to double the company’s sales in the next year. There is an overview of the Human Resource, Accounting, and Finance functional areas purpose statement and how each promotes trust, motivates, and supports collaboration. Incorporated in the plan is the evaluation of how the purpose, relevance, planning, decision-making and organizing influences...
Words: 4885 - Pages: 20
...standard and guidelines of 1980 (U.K) defines internal control “as the whole system of controls, financial and otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard and assets and secure as far as possible the completeness and accuracy of the records”. This working definition is all embracing enough to serve as a guide throughout this chapter. The system of internal control extends beyond financial matters of an organization, in that human resource control, production control, work study and scheduling, operations research, quality control, total quality management, audit committee, corporate governance and all security arrangements among others are integral part of the system of control. Even a recent development in accountancy profession called ‘forensic accounting’ could be traced to have emanated from the system of internal control in an effort to produce accounting information “suitable for use in a court of law”. Invariably, forensic accounting is increasingly playing more pro-active risk reduction roles by designing and performing extended procedures as part of audit, control measures and fraud deterrence. Therefore, internal control system is concerned with the controls operating in every area of an establishment as well as with the way in which Individual control interact. Internal controls extend to the physical security of the properties...
Words: 16546 - Pages: 67
...INTERNAL CONTROL (Case Study 2) 1. Introduction As President of LJB Company is looking to go public by bringing internal controls system which is as one of the most challenging corporate governance issues because internal control involves everything that controls risks to an organization. Our accounting department has been chosen to evaluate the internal controls of LJB Company. LJB Company is planning to be a publicly traded company in the near future. Our firm needs to evaluate the internal controls To determine where we are on the continuum of internal control compliance, where they need to be and how to close the gaps. One means of assessing readiness is to conduct a “dry run” to detect early warning signs of control deficiencies. A dry run will assess identified financial reporting risks, processes and controls, as well as control designs, against leading practices. We have gathered and provided information of internal control, also arranging the necessary the data into 3 aims of this case study: 2.Background Study LJB Company, a local distributor, has asked your accounting firm to evaluate their system of internal controls because they are planning to go public in the future. The president wants to be aware of any new regulations required of his company if they go public, so he met with a colleague of yours at a local restaurant. The president of the company explained the current system of internal controls to your colleague. Your colleague has...
Words: 2376 - Pages: 10
...THE IMPACT OF INTERNAL AUDIT ROLE ON RISK MANAGEMENT IN UAE PHD proposal Presented to (Dr Puah Chin Hong) Faculty of Economics and Business University of Malaysia Sarawak Presented By Muhammad Usman Research Proposal for PHD Admission: Presented By Muhammad Usman Page 1 TABLE OF CONTENTS 1.0 2.0 INTRODUCTION BACKGROUND 2.1 2.2 2.3 2.4 3.0 4.0 A brief history of internal auditing The role of the internal auditor Role of the risk management function The internal auditor and the risk management process PROBLEM STATEMENT RESEARCH OBJECTIVES 4.1 Specific Research Questions 5.0 6.0 7.0 8.0 9.0 IMPORTANCE OF STUDY SCOPE OF STUDY RESEARCH DESIGN THE LITERATURE REVIEW DATA COLLECTION & SAMPLING 9.1 9.2 Survey by questionnaire and interviews Sample selection 10.0 11.0 DATA ANALYSIS REFERENCES Research Proposal for PHD Admission: Presented By Muhammad Usman Page 2 1.0 INTRODUCTION The audit function has been performed at least since the fifteenth century. However internal auditing has developed most rapidly throughout the twentieth century as a core tool of risk assessment. Today, in businesses worldwide, the internal audit function is becoming very important for achieving the objectives of organizations. In recent years, UAE market has recognized the importance of the internal audit function, which is why that function has been established in some public as well as private companies. These companies setup audit functions to deal with the assessment...
Words: 2567 - Pages: 11
...common with him. Most importantly, Nate was an accountant. Not only was he an accountant, but also an accountant working a mid-level job in corporate America, a job that I could easily see myself doing. He grew up in central Minnesota in an upper middle class family and attended Gustavus Adolphus College (Duluth News Tribune, 2012). He was a very intelligent and knowledgeable accountant in addition to being very personable. All of these similarities really intrigued me and also scared me about who can commit a fraud and how easily the lines can be crossed. Now onto Nathan Mueller—the criminal. Nate was working as an accounting manager for ING Resurgence Corporation in their re-insurance division (St. Anthony, 2008). Before ING Resurgence, a subsidiary of the ING GROUP, had acquired ReliaStar Life Insurance Company, Nate began learning the new accounting information system People Soft. He was then trained to be the system specialist for his office. During the transitional stage from the prior system to ING’s People Soft system, Nate was able not only become extremely knowledgeable in relation to the operations of the system, but also found that the system had some anomalies or inconsistencies that were unknown to many if not all of the other...
Words: 1995 - Pages: 8
...Internal Control Evaluation An auditor uses a checklist template when conducting an audit of internal control. The auditor will assess the financial condition and internal procedures. Internal control process must comply with industry standards and regulatory requirements. Corporations must prepare responses to auditors and should have an internal control system in place. “Five components of internal control are considered to be criteria for evaluating a company’s financial reporting controls and the bases for auditor’s assessment of control risk as it relates to financial statements” (T. Louwers, R Ramsay, D Sinanson, J. Strawser, 2007 p. 163) The internal control evaluation has three phases in which an auditor uses to form assess the corporation and form an opinion. Phase 1 Understand and Document the Client’s Internal Control The primary objective of Phase 1 is to become familiar with the work and control environment. The auditor must learn the control environment by setting up interviews with staff. Auditor should ask specific questions about the flow of transactions in the accounting system. The corporation should provide the auditor with the design of the control procedures. To examine the control environment and complete an evaluation, the auditor will contact the Human Resource Department for a copy of the code of employee conduct and performance methods. The organizational chart will help the auditor identify management team and area of responsibility. To measure...
Words: 436 - Pages: 2
...A GUIDE TO FORENSIC ACCOUNTING INVESTIGATION THOMAS W. GOLDEN, STEVEN L. SKALAK, AND MONA M. CLAYTON JOHN WILEY & SONS, INC. A GUIDE TO FORENSIC ACCOUNTING INVESTIGATION THOMAS W. GOLDEN, STEVEN L. SKALAK, AND MONA M. CLAYTON JOHN WILEY & SONS, INC. This book is printed on acid-free paper. Copyright © 2006 by PricewaterhouseCoopers LLP. PricewaterhouseCoopers refers to the individual member firms of the worldwide PricewaterhouseCoopers organization. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this...
Words: 246885 - Pages: 988
