...Comprehensive Checklist for Evaluating Internal Controls ACC/544: Internal Control Systems Comprehensive Checklist for Evaluating Internal Controls As defined by the COSO framework, there are five elements that are used to explain an internal control system applied in an organization. These elements include: 1. Control Environment – The control environment is the foundation for the other four components of internal control. It outlines discipline and structure for the internal control method and consists of philosophy, ethical values, operating style, risk appetite, functioning of the board, and organizational structure (Louwers, Ramsay, Sinason, & Strawser, 2007). 2. Risk Assessment - This component evaluates the way in which an organization decides to handle the number of always-evolving external and internal risks. 3. Control Activities - This component seeks to ensure that the directives of management are carried out. These are computerized and manual and serve the purpose of preventing, detecting, and correcting errors (Louwers, Ramsay, Sinason, & Strawser, 2007). 4. Information and Communication – The information and communication component provide managers with the critical information necessary for achieving objectives. This component seeks to provide information that is timely, reliable, and relevant. 5. Monitoring – Assessing the quality of the established controls is essential to motivate continuous progress of the internal control method...
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...Internal Control Evaluation Checklist Phase I-Understanding Control Environment N/A YES NO Comments Is there an evidence of and implementation of a company code of conduct? Are codes periodically acknowledged by signature from all employees? Do employees indicate that peer pressure exists for appropriate moral and ethical behavior? Does management take quick and appropriate action as soon as there are any signs that a problem may exist? Management fosters and encourages an agency culture that emphasizes the importance of integrity and ethical values. This may be achieved through oral communications in meetings, via one-on-one discussions, and by example in day-to-day activities? Are there formal job descriptions or other means of identifying and defining specific tasks required for job positions established and up-to-date? Phase II-Assessment Risk Assessment N/A YES NO Comments Does management provide a sound basis for setting realistic and achievable goals and does not pressure employees to meet unrealistic ones? Are formal unit-wide mission or value statements established and communicated throughout the organization? Are employees at all levels represented in establishing objectives? Are risk management program in place to monitor and help reduce exposures? Are measures in place to identify...
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...Checklist for Evaluating Internal Controls Checklist for Evaluating Internal Controls Table of Contents Budgets and Planning 1. Segregation of Duties 2. Procedural Controls Cash 1. Segregation of Duties 2. Procedural Controls Revenues and Receivables 1. Segregation of Duties 2. Procedural Controls 3. Billing and Remittance Verification Capital Assets 1. Segregation of Duties 2. Procedural Controls Procurement and Payables 1. Segregation of Duties 2. Procedural Controls Payroll 1. Segregation of Duties 2. Procedural Controls Electronic Data Processing 1. Segregation of Duties 2. Procedural Controls Financial Reporting 1. Segregation of Duties 2. Procedural Controls Checklist for Evaluating Internal Controls Overview Organizations, whether for profit or non-profit, assess the effectiveness of internal controls. The most efficient way to gather information and evidence about the internal controls of an entity is to conduct an interview with the managers using a checklist form of internal control questionnaire (Louwers, 2007). The preparer of the checklist should include questions about each significant assertion in order to obtain evidence about the control environment. Answers to the internal control questionnaire are in the form of yes or no; no usually indicates some weakness or control deficiency. Policies and Procedures A. Segregation of Duties Yes/No Comments 1. Does your organization have an organizational...
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...Checklist for Evaluating Internal Controls Samy Yaacoub ACC/544 Internal Control Systems Prof. Robert J. Cornett March 26, 2012 University of Phoenix Checklist for Evaluating Internal Controls Abstract An auditor uses a checklist as an efficient toll in performing a review to the organization departments’ internal controls. This report provides a suggested comprehensive checklist to evaluate the organization internal control system in the PowerPoint presentation attached. It is also explains how to use this checklist and how the checklist covers and compound the organization internal control system objectives and its five component in the three phases of the internal control. Using the Checklist in Evaluating Organization Internal Controls The checklist works as an efficient tool to evaluate the organization internal control system through reviewing the organization internal control objectives. The checklist questions examine these objectives in details because it asks to response to topics related to authorization and approval, validity, completeness, recording accuracy, safeguarding, and reconciliation. The response to the checklist questions are including alternative answer “yes, no, not sure, and not applicable.” The “no” reply will designate usually a possible weakness, this can compensate by compensating controls within the unit. Apply the checklist to outline/discuss phases of the control evaluation The checklist beads...
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...A Checklist for 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...
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...Checklist for Evaluating Internal Controls Darius Perrin ACC/544 Checklist for Evaluating Internal Controls According to Investopedia (2013), internal controls are methods implemented by a company to ensure the organization is meeting their profitability targets efficiently while also keeping the integrity of the company. The following discussion will outline the three phases of the control evaluation which is understanding the documenting the internal control, assessing the control risks, and performing tests of the controls and reassessing control risks. Phase 1: Understand and Document Internal Control Phase 1 allows the auditors to work efficiently by getting a basic understanding of the organizations internal control. There are five components to internal control: control environment, risk assessment, control activities, monitoring, and information and communications. The following checklist will allow the audit team to gather evidence and focus their efforts in reviewing what aspect is at more risk and requires more review (Louwers, 2007). Yes/No Comments Control Environment Evaluation 1. Is there a written code of conduct displayed for employees to view? Yes 2. Are all employees aware for their goals as an individual? Yes 3. Is there a written document describing each employee’s job description? Yes 4. Would you consider your financial reporting attitude to be conservative? Yes 5. Are actions taken when an employee is found acting...
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...Checklist for Evaluating Internal Controls Control Environment Department: Preparer: Date: Please Enter Date here Yes No NS N/A | Checklist Questions | | 1. Are the company shareholder's approved of the project? | | 2. Is the company management approved of the project? | | 3. Has the employee's involved been fully informed of the project? | | 4. Does the project follow or improve the company's mission? | | 5. Does the project have a mission? | | 6. Has accounting reviewed the project? | | 7. Has accounting provided a report on the costs of the project? | | 8. Is the company ready to introduce the project? | | 9. Are the management and employees ready to work on the project till complete? | | 10. Does the project interfere with any Human Resource policies or procedures? | | 11. Are the employee's working on the project knowledgeable about the skills needed? | | 12. Has the Project Manager been chosen? | | 13. Can an internal audit be done on the project later? | | 14. Are all the three phases being followed? | NS = Not Sure N/A = Not Applicable Risk Assessment Department: Preparer: Date: Please Enter Date...
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...Checklist for Evaluating Internal Controls Internal Controls can be easily evaluated by making use of a comprehensive questionnaire containing all pertinent components of the internal control system in place within the company or business unit. The idea of the internal control questionnaires is to provide auditors with wealthy information in regards to the controls in place and possible risky areas. “Internal control questionnaires are designed to help the audit team obtain evidence about the control environment and about the accounting and control procedures that are considered good error-checking routines. Answers to the questions, however, should not be taken as final and definitive evidence about how well control actually functions. Evidence obtained through the interview-questionnaire process is hearsay evidence because its source is the supervisor, not the person who actually performs the control work. This person could give answers that reflect what he or she believes the system should be rather than what it really is. The person can be unaware of informal ways in which duties have been changed or can be innocently ignorant of the system details. Nevertheless, interviews and questionnaires are useful when a manager tells of a weak feature. An admission of weak control is fairly convincing” (Lowers, et. Al 2007). On Appendix A of this paper, an example of an Internal Control Questionnaire is provided. It is general by nature, but it can be easily customized to any company/industry...
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...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...
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...Checklist for Evaluating Internal Controls Lisa Cook ACC 544 October 31, 2011 Bret Mann Checklist for Evaluating Internal Controls Internal Control is to assist companies with reviewing and assessing its accountability within the organization. Internal controls are best practices for an organization that sets the tone and its main purpose is reducing business risk by controlling loss because of the misuse of the company’s assets. Fraud is sure to be detected through internal controls as well as help with the accuracy of its financial reporting. This analysis will provide a comprehensive checklist for evaluating internal controls and show how to apply the checklist to outline phases of the control evaluation. Evaluating Internal Controls Checklists The Committee of Sponsoring Organization (COSO) defines controls as the “process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following three categories: * Reliability of financial reporting. * Effectiveness and efficiency of operations. * Compliance with applicable laws and regulations. Internal control is designed to achieve objectives in various categories” (Louwers, et al, 2007, p. 149). The purpose for an internal control checklist is to analyze the efficiency of the organization’s controls in place, document the controls, and make recommendations and necessary improvements. Management...
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...Engagement Letter, Checklist, and Timeframes Engagement Letter, Checklist, and Timeframes October 29, 2012 Eric Unum Vice-President-Finance Apollo Shoes Inc. 100 Shoe Plaza Shoetown, ME 00001 Dear Sir, This letter is to confirm our understanding of the terms and objectives of our engagement and the nature and limitations of the services we will provide on the Apollo Shoes Company internal audit services. The objective of our audit is the expression of an opinion whether your financial statements are fairly and materially presented. Our audit will aligned with auditing standards GAAP and will include tests of your accounting records and other procedures we consider necessary to enable us to express such an opinion. If our opinion anything but unqualified, we will discuss this with you before issuance of the opinion. If, we are unable to complete the audit or are not able to form an opinion, we may not express an opinion or we may issue a report pursuant to this engagement. Our procedures will include tests of documents and evidence in support of the transactions in the accounts, tests of the physical inventories, and direct confirmation of certain receivables and payables via correspondence with selected random customers, vendors, creditors, and other financial institutions. At the end of our audit, we will need some written documentation from you about the financial statements and related matters. Our audit will involve our decision regarding the amount...
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...| | | | | | | | | | | | | | | | II. Process Overview (Prepared by Ashish) Objective | To define a standardized process for sample verification of physical/field work by a CA Firm as per invoice submitted by vendor | Scope | Assigning of work/Purchase Order to Vendor | Reference | Making payment to Vendor | Customer | Output | Process | Input | Supplier | * Vendor/Customer * Finance | * Certificate of Adherence/Non-Adherence by Internal Auditor * Certificate of adherence/non-adherence to Quality issued by Quality Assurance Engineer * Defined Quality Installation/Mechanism Vendor needs to follow * Hefty penalties on vendor against non-compliance * Instill competition amongst Vendor community beneficial for SPANCO & Essel Utilities on a PAN India basis as orders will be issued to the best | * Identifying and assigning work to vendor as per specifications and terms and conditions mentioned in the PO-including clause mentioning a 3rd party audit (Internal Auditor responsible for material supplied & services provided) * Within 7 days of completion of work vendor must submit invoice with soft copies for back-up and other documents required from time to time which has to be certified by user department * On submission of invoice by user dept. to...
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...ISO 9001:2008 Internal Auditor Checklist Copyright ©2008 The 9000 Store INTERNAL AUDIT CHECKLIST ISO 9001:2008 4 Quality Management System 4.1 General Requirements Has your organization established a management system (QMS) giving consideration to: a) Identifying the processes needed and the application of the processes throughout the organization: b) Determining the sequence and interaction of the processes? c) Determining the criteria and methods for operation and control of the processes? d) Ensuring the availability of resources and information to support the processes? e) Monitoring, measuring and analyzing these processes? f) Implementing actions to achieve planned results and the continual improvement? If your organization out sources any processes that affects product conformity, are the outsourced process controlled and identified? Additional questions Observation/Comments Results 4.2 Documentation Requirements 4.2.2 Quality Manual Does your organization have a quality manual? Does it include the following: a) The scope of your QMS and justifications and details of any exclusions b) The documented procedures for the QMS or reference them? c) A description of interactions between the processes of the QMS? Additional questions ©Copyright 2008 The 9000 Store Page 2 of 23 INTERNAL AUDIT CHECKLIST ISO 9001:2008 4.2.3 Control of Documents Does your organization have a formal procedure regarding the control...
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...A. Compliance Status The Joint Commission, JC, conducts reviews to provide accreditation to facilities based on compliance with federal and state rules and regulations as well as the accrediting body’s standards. The Accreditations Audit Case Study on Nightingale Community Hospital, NCH, for this task is based on documentation reviewed and pre-survey data collection thirteen months prior to the next Joint Commission review. This discussion provides an executive summary and current compliance status for one priority focus area for NCH as well as Plan of Correction and Justification for the needed actions. JC standards outline priority focus areas in the areas of Assessment and Care/Services, Quality Improvement Expertise/Activities, Communication, Infection Control and Patient Safety. For the purpose of this discussion, the Primary Focus Area of Communication will be discussed as it pertains to NCH. The JC Standards identify communication as the process for information exchange between organizations, departments, or individuals. This includes provider and staff communication, staff-to-patient communication, patient and family education, collaboration of services, multidisciplinary team work, and information dissemination. In preparation for the JC accreditation review, NCH reviewed the JC Communication standards pulled from UP.01.01.01; UP.01.02.01; and UP.01.03.01 and compared against the NCH policy and operations as well as data collected through the General Safety...
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...The Internal Assessment Chapter Four Chapter Objectives 1. Describe how to perform an internal strategicmanagement audit. Discuss the Resource-Based View (RBV) in strategic management. Discuss key interrelationships among the functional areas of business. Identify the basic functions or activities that make up management, marketing, finance/accounting production/operations, research and development, and management information systems. Copyright ©2013 Pearson Education 4-2 2. 3. 4. Chapter Objectives 5. Explain how to determine and prioritize a firm’s internal strengths and weaknesses. Explain the importance of financial ratio analysis. Discuss the nature and role of management information systems in strategic management. Develop an Internal Factor Evaluation (IFE) Matrix. Explain cost/benefit analysis value chain analysis, and benchmarking as strategicmanagement tools. Copyright ©2013 Pearson Education 4-3 6. 7. 8. 9. A Comprehensive StrategicManagement Model Copyright ©2013 Pearson Education 4-4 Key Internal Forces Distinctive competencies A firm’s strengths that cannot be easily matched or imitated by competitors Building competitive advantages involves taking advantage of distinctive competencies. Copyright ©2013 Pearson Education 4-5 The Process of Performing an Internal Audit The internal audit Requires gathering and assimilating information about the firm’s management, marketing, finance/accounting, production/operations...
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