...INTERNAL AUDITING AS AN EFFECTIVE TOOL FOR CORPORATE GOVERNANCE This journal of JBM International Science Press, examines the study of the relationship between internal audit and corporate governance with various argumentations of internal audit activities, attempting to sketch out their relationship. It analyses the contribution of internal audit to corporate governance. Based on what I found in the journal and my opinion, this journal have emphasized the importance of internal audit which is really compulsory for every company to follow as it improves the efficiency and effectiveness of the management and company. Moreover it also have mentioned that the relationship and communication between employer and management is important in internal control which is an effective idea on maintaining employer’s loyalty and reduce fraud. But this journal less focus on the disadvantage of internal control if it is not handled wisely which is really need to be considered before implementing internal audit control system. The journal have explained well on how the internal control benefits the company but as an auditor or a manager, one should also consider the disadvantage that might be faced by the company from internal audit control. Internal audit control systems have a few weaknesses that business owners must address. First, broad application. Internal audit control systems can be very broad in their application and this can create a weaker...
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...The Importance of Proper Internal Controls Lewis W. Wilson Jr. Post University College Abstract In the field of accounting, one important aspect of any business is their internal controls. Internal controls are defined as “a means by which an organization’s resources are directed, monitored, and measured” (http://en.wikipedia.org/wiki/Internal_control). Here in the United States, the Financial Accounting Standards Board (FASB) is responsible for setting the generally accepted accounting principles (GAAP) that must be adhered to by all companies and organizations within the states. Therefore, I have chosen to write a report to a client explaining the importance of following those rules and regulations set forth by FASB. Importance of Proper Internal Controls August 6, 2014 No Internal Control Corp. – NIC Systems Mr. John Doe Director of Finance, NIC Systems 1313 Mockingbird Lane Transylvania, CT 06666 Mr. Doe, This letter is in reference to our recent conversation, August 2, 2014, concerning the importance of implementing adequate Internal Controls at your organization. We feel we can better represent our clients and are obligated as your representative to insure we have an understanding of your internal controls and processes. Although we may not want to envision acts of fraud, employees that have been employed with organizations...
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...When it comes to the internal controls of firms and enterprises, executives are constantly keeping a close look on the accuracy and effectiveness of these controls along with seeking ways to better them. According to COSO (2004) the implementation of internal controls helps guide companies in reaching towards their profitability goals, the accomplishment of their mission statement, and helps minimize any unexpected events that may occur. This analysis will: (1) describe the importance of internal control programs, (2) identify effective internal control techniques, (3) illustrate the relationship between ethics and internal control techniques, and (4) describe the importance of the Sarbanes-Oxley Act. The Importance of Internal Control Programs Effective internal controls are the foundation to a safe, sound, and successful enterprise. A properly designed and GET BETTER GRADES consistently enforced system of internal controls helps a company's board of directors and management safeguard their resources and produce reliable financial reports. According to COSO, the three primary objectives of an internal control system are to ensure; efficient and effective operations, accurate financial reporting, and compliance with laws and regulations. Internal control programs can help managers in many ways such as measure performance, make decisions, evaluate progress, and limit risks. An effective control program can also help with avoiding surprises by detecting mistakes caused by...
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...in Corporate Compliance Insights discusses the importance and benefits of internal audit functions to publically traded companies and potential investors. Author Richard Chambers, CEO of the Institute of Internal Auditors, begins with a bold statistic stating 55% of Americans invest their hard earned money in the stock market, leaving their future financial well-being in the hands of the companies in which they invest in. With this many Americans turning towards the stock market to invest, some research should be conducted before doing so. Many people believe investigating the backgrounds the Board of Directors of a company is sufficient enough before investing. Although that is a good place to start, a potential investor should also ask himself “How effectively are risks managed?”, “How ethical is the culture?”, and most importantly, ”How strong is the control environment?” . A lack of internal audit controls should be a red flag to investors about the way a company is managed. Although having internal audit functions does not guarantee absolute assurance, not having these functions should raise questions. Potential investors should have a higher degree of confidence in companies that have internal audit functions as opposed to companies without them. However, investing in companies still has risks regardless if there are mandated internal audit functions in place. Internal audit functions do not completely guarantee a...
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...Running head: IMPORTANCE OF INTERNAL CONTROL IN BUSINESS 1 Importance of Internal Control in Business IMPORTANCE OF INTERNAL CONTROL IN BUSINESS 2 Introduction Brazos Manufacturing, Inc.(BMI), a $550 million international automotive parts supply company. It had urged to cut the budgets of its all of the vice presidents. The executive vice president of BMI fraudulently used corporate funds, set up an executive’s double standard and was above the law. However, the ethics officer considered the EVP’s tenure and 30 years authority and was at the very highest levels officer in North America. He wanted to avoid personal involvement in the case he should take action. The controller of company confronted the unethical behavior. He decided to strictly enforce the standards of BMI and disclose the ugly fact. How did company deal with the issues? How did company foresee the importance of the internal control in business and improve it and achieve its budgeted objective? IMPORTANCE OF INTERNAL CONTROL IN BUSINESS 3 Discussion In this case, EVP admitted to everything quickly and had apologized sincerely, and asked to keep his job. (Source) BMI should make the decision based on EVP’s attitude for his fraudulency instead of how huge his contribution to the organization for the past 30 years. Today, the legal and moral culpability of top-level company managers and the ethical...
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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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...RUNNING HEAD: Internal Controls and Maintaining Company Morale FINAL PAPER DEVELOPING AND IMPLEMENTING EFFECTIVE INTERNAL CONTROLS AND MAINTAINING EMPLOYEE MORALE By Melissa P. Abbey EM 290D DIRECTED STUDEY IN MANAGEMENT Submitted To Professor Donovan A. McFarlane, D.B.A. FREDERICK TAYLOR UNIVERSITY Moraga, California September 25, 2013 Abstract This report explores the aspects and importance of effective internal controls and how to maintain positive employee morale while developing and implementing organizational processes. The author explores various concepts and components of internal controls and the relationship of implementing effective controls while maintaining positive employee morale. Using a variety of resources including academic journals and electronic resources-informational sites, the author outlines standard components for developing effective internal controls and strategies for implementation in order to maintain positive employee morale. Keywords: Internal Controls, risk management, policies and procedures, organizational structure and culture, roles and responsibilities communication, collaboration, risk assessment, monitoring. Introduction All Organizations, no matter the size should have some type of internal controls in place. Although broad in scope, internal controls are intended to prevent companies from securing financial risk or wrongdoing and increase the chances of success while obtaining a specific objective; any business...
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...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 use of different accounting record in the following. Purpose To illustrate the purpose of accounting records we chose main two types of accounting record. These are journal and ledger. The journal represents the original entry. The purpose of...
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...LBJ Company Internal Controls Assessment Report October 6, 2012 Table of Contents Introduction: 3 Considerations 3 Importance of Internal Controls 3 LJB Internal Control Assessment 3 Conclusion 4 Bibliography: 5 Introduction: LJB Company has engaged RR Accounting Firm to evaluate their current system of internal controls as LJB Company is planning to go public. Public companies have additional responsibility to shareholders and investors and must ensure integrity over their financial statements by maintaining a strong and effective internal control environment. The purpose of this report is to provide an objective analysis of the control environment of LBJ Company. This report will discuss importance of internal controls and identify both the current strengths and the current weaknesses in LJB Company's control environment within the following sections: 1. Compliance with Federal Regulations on Internal Controls for Public Companies. 2. Importance of Internal Controls. 3. Assessment of Internal Control Environment at LBJ Company. (a) Governance - Tone at the top (b) Segregation of Duties (c) Documentation Procedures (d) Physical Security (e) Human Resources 1. Compliance with Federal Regulations on Internal Controls for Public Companies As LJB Company is considered to be a small organization, going from private owned to public traded will require extensive planning. During...
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...Internal Control and Risk Evaluation Lauren A Lewis Accounting Information Systems ACC/542 June 23,2014 Yasin Dadabhoy Internal Control and Risk Evaluation Internal controls and risk assessments are an essential part for an organization to be successful. Management at Kudler Fine Foods has reviewed the flowcharts prepared and is requesting information on controls that will be required. Risks are the negative events that may occur causing a change in an organizations productivity. Internal controls are the policies and procedures put in place to reduce unexpected occurrences related with the risks. This brief will discuss the risks of Kudler Fine Food’s current Accounting Information System evaluated by Learning Team A. It will also identify all risk and control points by incorporating the controls and risk into the flowcharts. Team A will design internal controls to ease risks to the systems, and discuss other controls, outside the system, that Kudler Fine Foods may need When evaluating Kudlers accounting information systems and the integration of the automation we found that Kudlers focus should be on payroll, accounts payable, accounts receivable, and inventory processes. Theses processes have risk involved. This brief will focus on Kudlers internal and external controls, which include polices and procedures, HR compliance/code of conduct and computer information access. Kudler must maintain a policy and procedures system documenting in detail how each procedure...
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...Controls for Information Technology The success of a business is determined by how effective its managers are in managing risk. Therefore, acquiring effective risk management helps to protect the company from losses because of poor accounting practices as well as fraudulent activities. Using good controls protect managers from liabilities that may arise when certifying financial statements used in annual reports because when these reports are issued, they are also a reflection of the company’s internal controls. The internal control process begins with management and the attitude that management portrays through the company. Manager duties include implementing the policies and procedures used within the company, these policies and procedures are also used to build the structure which is found within the internal control environment. Internal Control Reporting Options An audit report has three general functions used to report a company’s financial statements. These reports indicate whether the financial statements are presented in conformity with generally accepted accounting principles. Auditors use their reports to highlight any unusual aspects of the audit examination, and the reports can be used to communicate useful information to decision makers that may not appear on the face of the financial statements. Internal reporting options are important in keeping regulators, investors, and employees informed, and the format should be understandable for managers...
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...answer to that is to “try it, it does work for PDP”. The shorter version is a PEST Analysis – missing out Legal and Environmental factors. At the end of this document is an explanation of the use of PESTLE for organisational change. How PESTLE may be used for PDP For PDP purposes view yourself as being ‘the organisation’ – an organisation subject to external factors, and internal factors. 1 For each of the 6 PESTLE factors brainstorm and identify 5-10 things which, based on existing knowledge, may change or are likely to change over the short term, medium term and long term. 2 Then assess/evaluate their likely impact/affect/relevance/importance on/to/for you. · Then narrow these down and rank them for importance/priority – so that each factor has 3 most important or most likely changes. · Then select/choose the most important or most likely 3 changes from across all factors. You may need expert knowledge for this or need to use risk analysis and/or urgency vs importancy grid. 3 Then identify if a factor and/or its impact will be external or internal. Ie can you control it (internal) or...
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...Controls for InformationTechnology and Reporting and Evaluation Julie Strange University of Phoenix ACC/544 Internal Control Systems Christina Yang October 24, 2011 Controls for Information Technology The success of a business is determined by how effective its managers are in managing risk. Therefore, acquiring effective risk management helps to protect the company from losses because of poor accounting practices as well as fraudulent activities. Using good controls protect managers from liabilities that may arise when certifying financial statements used in annual reports because when these reports are issued, they are also a reflection of the company’s internal controls. The internal control process begins with management and the attitude that management portrays through the company. Manager duties include implementing the policies and procedures used within the company, these policies and procedures are also used to build the structure which is found within the internal control environment. Internal Control Reporting Options An audit report has three general functions used to report a company’s financial statements. These reports indicate whether the financial statements are presented in conformity with generally accepted accounting principles. Auditors use their reports to highlight any unusual aspects of the audit examination, and the reports can be used to communicate useful information to decision makers that may...
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...REBECCA OTTO STATE AUDITOR (651) 296-2551 (Voice) (651) 296-4755 (Fax) state.auditor@state.mn.us (E-mail) 1-800-627-3529 (Relay Service) Statement of Position The Importance of Internal Controls Internal controls are designed to protect a local government unit from loss or misuse of its assets. Internal controls also ensure that all transactions are properly authorized and the information contained in financial reports is reliable. This Statement of Position will provide public officials and employees with practical answers to some of the questions most frequently asked about internal controls. What is the purpose of internal controls? Internal controls help safeguard funds, provide efficient and effective management of assets, and permit accurate financial accounting. Internal controls cannot eliminate all errors and irregularities, but they can alert management to potential problems. How much will this cost? The cost of internal controls should never exceed their expected benefit. When adopting polices and procedures on internal controls, maintain a balance between what is needed to ensure public confidence and to maintain the integrity of the financial systems with the cost of providing the control in terms of money, time, and efficiency. Many simple and cost-effective internal control procedures are available. Does someone need to review every transaction? No. It is not practical or profitable to attempt to independently review every transaction. Instead...
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...EVALUATION OF INTERNAL CONTROLS EVALUATION OF INTERNAL CONTROLS E LJB COMPANY 1100 Main St Kansas City, Missouri 64105 United States (816)943-7310 (816)943-7300 2/6/2013 LJB COMPANY 1100 Main St Kansas City, Missouri 64105 United States (816)943-7310 (816)943-7300 2/6/2013 Internal control is measures adopted within an organization to safeguard its assets, enhance the reliability of accounting records, increase efficiency of operations, and ensure compliance with laws and regulations (Kimmel, Weygandt, Kieso, 2009). This document analyzes both LJB Company strengths and weaknesses and provides recommendation on internal control measures. Internal control is measures adopted within an organization to safeguard its assets, enhance the reliability of accounting records, increase efficiency of operations, and ensure compliance with laws and regulations (Kimmel, Weygandt, Kieso, 2009). This document analyzes both LJB Company strengths and weaknesses and provides recommendation on internal control measures. TABLE OF CONTENTS Introduction * Overview of Internal Controls * Importance of Internal Controls * The Sarbanes-Oxley Act of 2002 (SOX) Components of Internal Controls * A control environment * Risk assessment * Control activities * Information and communication * Monitoring Principles of Internal Control Activities * Establishment of responsibility * Segregation of duties * Documentation procedures * Physical...
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