Essay about Internal Control

Submitted By qiaoliang1977
Words: 3832
Pages: 16
Open Document
D. 1. 2. 3. 4. 5. 6.

INTERNAL CONTROL Internal Control Systems The Use of Internal Control Systems by Auditors Transaction Cycles Tests of Control The Evaluation of Internal Control Component Communication on Internal Control

Internal Control Systems
Why must Auditors understand the Accounting System and Control Environment of an entity? Auditor must understand the accounting system and control environment in order to determine their audit approach. How would you define what Internal Control is? Internal control is the process designed and put in place by those whose job it is to govern and manage the company to provide reasonable assurance about the reliability of financial reporting, the efficiency and effectiveness of operations and compliance with applicable laws and regulations. What are the elements that make up the Internal Control?      The control environment The entity’s risk assessment process The Information system relevant to financial reporting Control activities Monitoring of controls

What is the Control Environment? The control environment includes the functions, attitudes, awareness and actions of those responsible for governance and management concerning the entity’s internal control and its importance in the entity. Because controls are more likely to operate well in an environment where they are treated as being important a strong control environment does not, by itself, ensure the effectiveness of the overall internal control system but a weak control environment can undermine the effectiveness of controls. What is the Entity’s risk assessment process? The entity’s risk assessment process involves processes the entity has put in place to identify business risk relevant to financial reporting objectives, estimating the significance of the risk, assessing the likelihood of their occurrence, and deciding upon actions to address those risk.

What is the Information System Relevant to Financial Reporting? The information system relevant to financial reporting includes the financial reporting system, it consists of procedures and records established to start, record, process and report entity transactions and maintain accountability for the related assets, liabilities and equity. What are Control Activities? Control activities are those policies and procedures that help ensure that management directives are carried out. Control activities include those activities to prevent or to detect and correct errors. This includes activities relating to authorisation, performance reviews, information processing, physical controls and segregation of duties. Note: Segregation of duties is a part of the control activities. Segregation implies more people being involve in the accounting process and this makes it more difficult for fraud or accidental errors to slip through. The key functions that should be segregated are the carry out of a transaction, the recording of a transaction and the maintaining custody of assets that arise from the transaction. What is involved in Monitoring of Controls? Monitoring of controls is a process to assess the effectiveness of internal control performance over time. It includes assessing the design and operation of controls on a timely basis and taking necessary corrective actions modified for changes in conditions. What do the internal controls in a computerised environment include? The internal controls in a computerised environment include general controls and application controls? What are General Controls in a computerised environment?  Development of computer application o Standards over systems design, programming and documentation o Testing procedures using test data o Approval by computer users and management o Segregation of duties from those who design and those who test o Installation procedures o Training of staff Prevention or detection of unauthorised changes to program o Full records of program changes o Password protection o Restricted access to central
Show More

Related Documents: Essay about Internal Control

Essay on Internal Control

Internal Controls xxxxxxxxxx xxxxxxxxxx xxxxxxxx xxxxxxxxxxxx Internal Control Internal control is the process by which management structures an organization to provide assurance that an entity operates effectively and efficiently, has a reliable financial reporting system and complies with applicable laws and regulations. Internal controls primary goals are used to protect assets and improve the accuracy of accounting records. Protecting the assets includes measures to avoid employee theft…

Words 660 - Pages 3

Essay on Internal Control

CASH CONTROL GUIDELINES General The term “cash” includes currency, coin, checks, money order, credit/debit cards, ACH online payments and electronic file transfers. All departments receiving any form of cash, including cash receipts, change funds and petty cash funds must be authorized by the Director of Student Accounts. This authorization is established through a Memorandum of Understanding that outlines the responsibilities of the cash site and assigns accountability to an i…

Words 1214 - Pages 5

Types Of Internal Control

INTERNAL CONTROLS The backbone of the business When there is a business setting and people have to rely on others to help their business grow and develop, there will always be issues. One of the biggest issues when hiring employees to help grow your business is deciding who to trust to handle the financial aspects of the business. The business should establish some type of internal controls to aide in managing the assets of the company. What are internal…

Words 768 - Pages 4

Essay on Internal Controls

INTERNAL CONTROLS 1. Internal Controls Audrey Banks University of Phoenix Audrey Banks is a student at University of Phoenix if there are any questions or concerns about this essay you may contact her at audrey32685@email.phoenix.edu INTERNAL CONTROLS 2. Abstract In this essay you will find an introduction to internal controls. What internal controls are and how internal control…

Words 1040 - Pages 5

Essay On Internal Controls

Internal Controls XACC/280 4/21/2013 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…

Words 984 - Pages 4

internal control Essay

Internal control is the process designed to ensure reliable financial reporting, effective and efficient operations, and compliance with applicable laws and regulations. Safeguarding assets against theft and unauthorized use, acquisition, or disposal. Internal controls also control: Segregation of duties, Proper authorization, adequate documents and records, Physical control over assets, Independent checks on performance. The third party (Auditors) will be hired to testify the internal control every…

Words 785 - Pages 4

Internal Control Essay

Accounting 310 Professor Yavari Internal Control The Children's Place Retail Stores is a leading specialty retailer of children's merchandise, ages newborn to 10 years old. The company designs, contracts to manufacture and sells high-quality, value-priced merchandise under the proprietary "The Children's Place" brand name. As of February 1, 2011, the Company owned and operated 995 The Children's Place stores in North America and its online store, www.childrensplace.com. As a growing specialty…

Words 1290 - Pages 6

Case Study Of Internal Controls

audit of their internal audit controls. They want to know what they are doing correctly and how that helps their internal controls. They also want to know what they are doing incorrectly or poorly, how to improve it and how that will improve their internal controls. Internal controls are important for a company to be successful and mandatory for a company to go public. Brief LBJ is a small, growing company. It has room to improve on its internal controls. There are certain controls they need to start…

Words 788 - Pages 4

Internal Control FOR POSTING Essay

INTERNAL CONTROLS Internal Controls: Increasing Responsibility within Organizations Corporations struggle with the difficulty of tracking every transaction and every dollar, and it becomes much more difficult when there are millions of dollar being distributed and collected over any given time. This is when a company must have strong internal controls to account for where these transactions have taken place and that they are accurate. Internal Controls is an accounting procedure or…

Words 908 - Pages 4

Justification For An Internal Control System

1 Justification for an Internal Control System Barbara Lay Acc/544 3/8/2015 Bunny Schmidt 2 Justification for an Internal Control System Recently I have encountered a great deal of inquiries from leadership as to why there is need for an internal control system. I would like to submit a brief document explaining my reasoning for this recommendation. As the Controller of Los Pollos Hermanos, I have a great deal of responsibly to ensure I am doing everything I can to mitigate risk and…

Words 794 - Pages 4