...ACCOUNTING AND INTERNAL CONTROL SYSTEM (ISA 400) Definitions Accounting systems Refers to the systems and procedures that management has put in place to ensure that the company maintains proper books of accounts. The auditor should ascertain the client’s system of recording and processing transactions and assess its adequacy as a basis for the preparation of financial statements. An accounting system provides for the orderly assembly of accounting information and appropriate analysis to facilitate the preparation of financial statements. The management of an organisation requires complete and accurate accounting and other records to assist in: a) Controlling the business b) Safeguarding the assets c) Preparation of the financial statements d) Complying with legislation Internal controls If the auditor wishes to place reliance on any internal controls he should ascertain and evaluate those controls and perform compliance tests on their operation. If the clients system is evaluating as being effective, the auditor can rely on these controls and reduce the level of detailed substantive work. Definition An internal control systems consists of all the policies and procedures (internal controls) adopted by management of an entity to assist in achieving management’s objective of ensuring, as far as practicable the orderly and efficient conduct of its business, including adherence to management policies, safeguarding of assets, the prevention and detection of fraud and...
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...Famima!! Internal Control When looking for a quick drink or fast meal, it is sometimes very troublesome to have to drive to a market and wait in potentially long checkout lines. This sparked the idea for a smaller store that only carries the most frequently bought items for the customer’s convenience. Nicknamed convenience stores for very obvious reasons, these little establishments exist all over the world and carry just about any little thing you might need at a very local distance. Inventory differs largely based on location and ownership, but these stores will carry everything from water to groceries and even motor oil. In Japan, most convenience stores are smaller and family owned with many of the locals nicknaming them “family marts.” One lucky owner managed to make enough money to open several stores and created a franchinse named Famima!!, a contraction of the family mart nickname. Through smart investing and marketing, he was able to turn his tiny convenience store into a corporation and business. Today Famima!! has extended its reach into the United States and offers an alternative to the well-known and dominant 7-11’s and Circle K’s. The Famima!! stores currently serve the greater Los Angeles area and one of the stores has even appeared in the 2010 movie Inception by Christopher Nolan. Today I will be meeting with Kevin Chan, the Los Angeles District Manager and interviewing him about the internal control policies Famima!! Co. has in place. Name, Title and number...
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...EURIDIS Research Monograph SCHEMATIC EVALUATION OF INTERNAL ACCOUNTING CONTROL SYSTEMS Kuo-Tay Chen* and Ronald M. Lee# * Department of Management Purdue University at Calumet Hammond, IN 46323 U.S.A. chenk@pucal.bitnet # Erasmus University Research Institute for Decision and Information Systems (EURIDIS) Erasmus University Rotterdam The Netherlands rlee@fac.fbk.eur.nl ERASMUS UNIVERSITY RESEARCH INSTITUTE FOR DECISION AND INFORMATION SYSTEMS Schematic Evaluation of Internal Accounting Control Systems by Kuo-Tay Chen and Ronald M. Lee Monograph No. RM-1992-08-1 (August 11, 1992) EURIDIS Research Monograph Erasmus University Rotterdam, The Netherlands © Kuo-Tay Chen and Ronald M. Lee Permission to copy this monograph without fee is granted provided that (1) the copies are not distributed for the direct commercial purpose and (2) this copyright page including the copyright notice, the EURIDIS monograph number, and date appear. TABLE OF CONTENTS CHAPTER 1. INTRODUCTION ...................................... 1 1.1 BACKGROUND .......................................... 1 1.2 MOTIVATION ............................................. 3 1.3 OBJECTIVE OF THE STUDY .......................... 4 1.4 ISSUES OF INTEREST .................................. 6 1.5 SCOPE OF THE STUDY................................. 7 1.6 CONTRIBUTIONS OF THE STUDY .................. 8 CHAPTER 2. DECISION AIDS RESEARCH FOR INTERNAL CONTROL EVALUATION .............................................
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...Asia-Pacific Development Journal Vol. 8, No. 1, June 2001 ISSUES IN TAX REFORMS Azizul Islam* This paper seeks to describe the principles that have guided recent tax reforms in Asian developing countries. It critically examines the purported rationale underlying these reforms and raises some issues connected with these reforms. The paper first discusses the new direction of the perceived role of taxation as a macroeconomic tool and the principles which have formed the basis of recent tax reforms. It then analyses the implications of the application of these principles for the level and structure of taxes. It concludes with a summary of the key issues raised in the paper. Developing countries implemented an array of major economic reforms during the 1980s and the 1990s. Tax reforms formed an integral part of these reforms. The impetus for tax reforms was provided by a number of domestic and external factors (ADB, 1993). The last two decades were marked by a fundamental reassessment in developing countries of the role of the Government in economic development. There was a discernible shift in favour of assigning a greater role to the private sector, including foreign enterprises. This required re-examination of the structure of tax systems. Faced with declining external assistance, many Governments came under pressure to reduce budgetary deficits in the interest of macroeconomic stability. Multilateral development agencies required deficit reduction as a precondition...
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...Accounting Information Systems Research Paper Abstract The Sarbanes-Oxley Act of 2002 (SOX) was enacted into law in 2002 in the wake of corporation financial reporting scandals involving large publicly held companies. SOX instituted new strict financial regulations with the intent of improving accounting practices and protecting investors from corporate misconduct. SOX requires corporate executives to vouch for the accuracy of financial statements, and to institute and monitor effective internal controls over financial reporting. The cost of implementing an effective internal control structure are onerous, and SOX inflicts opportunity costs upon an enterprise as executives have become more risk adverse due to fears of incrimination. The Public Company Accounting Oversight Board (PCAOB) was created by SOX to oversee the accounting process and dictate independence requirements for auditors and auditing committees. The PCAOB proposed regulations must be approved by the SEC before they are enacted. Since the passage of SOX, the IT department has become critical in designing and implementing the internal controls in company accounting information systems. The Information Technology Governance Institute (ITGI) created a framework called Control Objectives for Information and Related Technology (COBIT) to provide guidance for companies to implement and monitor IT governance. Accounting Information Systems Research Paper The Sarbanes-Oxley Act of 2002 changed the...
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...Accounting in the Bible Abstract: This paper traces several accounting concepts in the Bible. In particular, the Bible discusses the objectives of accounting, internal control procedures and managerial accounting topics. This paper links the Bible to current accounting thought. The beginnings of modern accounting are commonly traced to Pacioli in the 15th century. Actually many of the fundamental ideas that underlie modern accounting may be traced much further back. The Bible, which is generally viewed as covering events between 1800 B.C. and 95 A.D., contains several references, both direct and indirect, to accounting and basic accounting concepts. In particular, it discusses financial accounting, internal control, and management accounting. The purpose of this paper is to discuss the Bible’s relationship to accounting thought. Financial Accounting One of the major purposes of accounting is to monitor the per-formance of management. In addition, accounting serves the purpose of insuring that the accounting entity is not defrauded either by its agents or by outsiders. The Bible discusses this in a negative way in 2 Kings 12:16 which says about the building of the Temple: “No accounts were kept with the men to whom the money was paid over to be spent on workmen since they were honest in their dealings.” This is virtually repeated in 2 Kings 22:7. We can infer from this that accounts would have been kept if the contractors were less than honest. Thus the Bible points out...
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...An Examination of LBJ Distribution Company Internal Controls Infrastructure Pre IPO ACCT 504: Financial Accounting Keller Graduate School of Management Professor Ganesh Pandit Date: February 9, 2014 Pre IPO Examination of LBJ Distribution Company Internal Controls Infrastructure Prepared for: President, LBJ Distribution Company Prepared By: Véron S.A. Lake Company: LLMCO Date: 9 February 2014 Table of Contents Introduction 3 Purpose 4 Legal Requirement of Internal Controls 5 IPO Readiness: Financial Internal Controls 5 IPO Readiness: Recommendations 6 Reliable Monthly Reports 6 Adequate Staffing of Financial Departments 6 Implementation of Audit Infrastructure 6 IPO Readiness: LBJ Internal Control Strengths 7 Pre-numbered Invoices 7 Recommendations: Indelible Ink Machine 7 IPO Readiness: LBJ Internal Control Weaknesses 7 Staffing: Accounting Department 7 Staffing: Human Resource Department 8 Recommendations: Handling Petty Cash 8 Recommendations: IT Department Physical Controls 9 Conclusion 9 Works Cited 10 Introduction A company going public today is different than what it was in the dot com era; this is because the IPO landscape has changed significantly in the last decade (KPMG, 2013). Recently experts has seen compression in the markets, decreasing or shifting mergers and acquisition activity, faltering businesses and more scrutiny on balance sheets and company cash as well as access to capital (KPMG, 2013; Morgan...
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...Internal Controls Caryn Baret 3/13/2013 Jana Howie Internal Controls 3 Internal Controls Internal controls are safeguards that a company uses to protect their financial information. Their safeguards can be universally accepted or can be unique to one company. Internal controls center around the company's accounting information system, which is the primary function used for moving financial information around a company. Internal controls help many companies to direct, monitor, and measure the effectiveness of their accounting operations. Internal controls will often focus on limiting the abuse or fraud that may be made by employees. They also provide owners and managers with reasonable assurance that all the financial statements are done right, correct and on a timely manner. Owners and managers may use the internal controls to limit the number of people who can have access to the company's information systems. The will help limit the opportunity for any abuse on this information. The owners, managers, and supervisors may take the role when enforcing the internal controls, to keep them in charge of the information system. Internal controls are usually at the organizational and transaction level of the company’s information systems. Organizational level ensures the company will follow all the standards, law and regulations...
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...AUDIT AND RISK COMMITTEE CHARTER (as amended and restated as of January 23, 2011) Purpose The Committee is responsible for assisting the Board of Directors in its oversight responsibilities relating to (i) the integrity of the Company’s financial statements and financial reporting process; (ii) internal and external auditing, including the qualifications and independence of the independent registered public accounting firm and the performance of the Company’s internal audit services function; (iii) the integrity of the Company’s systems of internal accounting and financial controls; (iv) legal and regulatory compliance; (v) the assessment and management of the Company’s risk and capital; and (vi) the performance of the other Committee functions set forth in this charter. In discharging its responsibilities, the Committee is not itself responsible for planning or conducting audits or for any determination that the Company’s financial statements and disclosures are complete and accurate or are in accordance with generally accepted accounting principles and applicable rules and regulations. This is the responsibility of the Company’s management and the independent registered public accounting firm. In addition, the Company’s management is responsible for managing its risk function and for reporting on its processes and assessments with respect to the Company’s management of risk. Organization and Certain Responsibilities The Committee shall be comprised of at least three directors...
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...Internal controls are referred to the methods established by a company to safeguard its assets. Internal controls are designed with the idea of achieving a company's objectives, which include the effectiveness and efficiency of operations, that the information presented to financial statement users is reliable, and that the firm is complying with regulations and laws (Bodnar & Hopwood, 2013, p.13). Internal control requires the distribution of responsibilities among employees. It is important for employees to know their task or job function in an entity since they will work harder to control these responsibilities. One example of an internal control placed in a company is the segregation of duties, which implies that the same department or person does not have control upon accounting and financial responsibilities (Bodnar & Hopwood, 2013, p.14). Internal control has an important role in the development of Accounting Information System (AIS) since the success of AIS depends on the effectiveness of the internal controls of a firm. AIS is defined as the transformation of financial and other data, collected by people and equipment, into information. The effectiveness of internal controls assure that the data entered by employees of a company in a computerized system, the techniques used to process information, the methods used to store information, and the information produced are accurate and appropriate Internal controls are designed to monitor and keep the quality of...
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...Internal Controls xxxxxx Accounting 280 April 8, 2012 xxxxxxxx Internal controls ensure that all public companies follow a standard set of rules to operate and report finances in business. It is required by law to monitor the different models of internal controls. According to Renee O'Farrell (2012), "'internal controls' can be defined as actions and procedures by which a company monitors itself". The two primary goals of internal controls are to safeguard assets from theft and unauthorized use, and to enhance the accuracy and reliability of company accounting records to avoid errors and irregularities in the accounting process. The establishment of responsibility, the use of physical, mechanical, and electronic controls, the segregation of duties, and the independent internal verification are internal control principles. Establishing responsibility is necessary to hold all employees responsible for the records reported. If a company successfully reports records inaccurately, the scandals that occurred in the early 2000s could be repeated. By holding employees, management, the board of directors, and auditors responsible, it helps control that documents and records are truthful when reported. This allows the shareholders' of the company to make the best financial decisions with the information given (Internal Control", 2012). The physical control of the company is established as a safeguard for records. This includes physical safeguards and IT Security. Physical...
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................................................. ..4 4.2 What is bad?.......................................................................................................................4 6. Recommendations and Action plans ………………………………………….………….….4 7. Conclusion………………………………………………..........................................................5 8. Acknowledgements.............................................................................................................5 9. Cited………………………………………………………………………………………………….5 EXECUTIVE SUMMARY LBJ Company a local distribution company has solicited the Langford Accounting Firm to present to the President of the company, an “unqualified opinion” to evaluate the company’s system of Internal Control. This evaluation is base in part on the company future growth and expansion plan to become a publicly traded company in the very near future. BACKGROUND/INTRODUCTION LBJ Company, a local distribution company is a small close-knit operation that has a lot of faith in their long-term employees. The company has one...
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...Acknowledgements I am thankful to our ‘Honorable Instructor’ Mr. A. H. Lutful Hassan, Deputy Director, P&D Adjunct Faculty, school of business of Independent University, Bangladesh. He provided me valuable assistance in preparing this assignment. I am deeply grateful to him, that he constructs this course to render exposure of Auditing as well as the basic functioning of such. The course builds on the capacity developed in the principle of accounting practice basic concepts and apply them in real case situations. This will help me a lot, in accounting and auditing discipline and auditors decision making process in the real world. I am sincerely thanked to him, that he gives us this case as an assignment, which will help us in future. Because of, this case is based on the practical experience from ‘real world’ situation that is applicable to all business organization. It is making us familiar with real experience. We now know what kind of fraud is taking place in organization, how we can prevent them, how we improve breakdowns, what kind of process should an auditor follows to discover fraud, all of this will help us further carrier as an auditor Dhaka April 2011. Neaz Executive Summary An audit is an examination of a company’s financial statements prepared by the directors...
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...Accounting is considered as the major helping hand to form a successive management which needs to report and analyse the business transactions. Accounting is a pathway of measuring success through the designing projects as measuring the outcomes of the projects in line with the target goal of the organisations (Elliot, Barry & Elliot, Jamie, 2004). Organisations maintain their financial reports with the help of accounting theories and policies. The international financial reporting standards also help to keep the accounting practice effectively, efficiently, and correctly. The efficient management will be built if the organisation follows the international reporting standards accurately. As a mandatory course unit of myself I need to prove my understanding about the financial systems and auditing through this report. I will gradually demonstrate my understanding on the purpose, use, importance of accounting records, accounting systems, computerised accounting system, manual accounting systems, business risk, audit risk, internal and external control systems, importance of auditing, and planning audit assignment as well as preparing audit report in the body part of my report. Task One Purpose and Use of Different Accounting Records Accounting records represents the management of all source of information in different records books. These records are ledger, journals, bank statements, adjusting journals, statement verification, invoice, brochure, and etc. The purpose and...
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...Chapter 1 Auditing and Internal Control Review Questions 1. What is the purpose of an IT audit? Response: The purpose of an IT audit is to provide an independent assessment of some technology- or systems-related object, such as proper IT implementation, or controls over computer resources. Because most modern accounting information systems use IT, IT plays a significant role in a financial (external audit), where the purpose is to determine the fairness and accuracy of the financial statements. 2. Discuss the concept of independence within the context of a financial audit. How is independence different for internal auditors? Response: The auditor cannot be an advocate of the client, but must independently attest to whether GAAP and other appropriate guidelines have been adequately met. Independence for internal auditors is different because they are employed by the organization, and cannot be as independent as the external auditor. Thus internal auditors must use professional judgment and independent minds in performing IA activities. 3. What are the conceptual phases of an audit? How do they differ between general auditing and IT auditing? Response: The three conceptual phases of auditing are: i. Audit planning, ii. Tests of internal controls, and iii. Substantive...
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