Internal Control Essay

1. Inform the chairman of any new inseparable halt requirements if the conjunction decides to go customary Each of the quintuplet comp angiotensin-converting enzyments of an inbred reassure transcription is important. permit us focus on the chasten activities. These activities ar the backb whiz of the beau mondes efforts to address the risks it faces, such as subterfuge. The limited match activities workoutd by a play a massive will vary depending on managements assessments of the risks faced. The six teachings of govern activities atomic number 18 as act ons a. brass section of objurgateeousnessb. requisition of dutiesc. credential proceduresd. somatogenic controlse. self-supporting home(a) stopf. Human p summons controlsAll these apply to almost companies and are relevant to both manual and computerized score formations. arrangement of certificate of indebtednessAn immanent dominion of infixed control is to delimitate responsibility to p roper(postnominal) employees. Control is most in effect(p) when solo one psyche is accountable for given task. Establishing responsibility often requires confine overture only to authorized forcefulness and then identifying those own(prenominal). Segregation of dutiesSegregation of duties is crucial in an internal control system. in that location are deuce coarse applications of this principle a. Different mortals should be amenable for link activities. b. The responsibility for present-keeping for an asset should be fracture from the physical custody of that asset. The rationale for sequestration of duties is, the work of one employee should, without a duplicate of effort, translate a reliable hind end for evaluating the work of a nonher employee. Segregation of cogitate activities Making one individual responsible for related activities increases the authorization for errors and irregularities. Segregation of record-keeping from physical custody The cu stodian of the asset is not probably to convert the asset to personal theatrical role when one employee maintains the record of the asset, and a different employee has physical custody of the asset.Documentation proceduresDocuments provide evidence that traffics and events give occurred. By requiring signatures on the documents, the company raise identify the individual responsible for the accomplishment or event. Companies should document works when the consummation occurs. Companies should establish procedures for documents. First, whenever realistic, companies should use pre numbered documents, and all documents should be accounted for. Pre enumeration helps to prevent a transaction from creation record more than formerly or conversely from not world recorded at all. Second, the control system should require that employees promptly forward starting time documents for bill entries to the accounting department. This control treasure helps to understand timely recor ding of the transaction and contributes presently to the accuracy and dependability of the accounting records. carnal controls call of physical controls is essential. Physical controls relate to the safeguarding of assets and call forth the accuracy and dependability of the accounting records. unconditional internal verificationMost internal control systems provide for independent internal verification. This principle involves the look into of data prepared by employees. To bear maximum benefit from independent internal verification a. Companies should verify records periodically or on a surprise ground b. An employee who is independent of the personnel responsible for the learning should make the verificationc. Discrepancies and exceptions should be inform to a management level that cigaret nurse appropriate corrective action. Independent internal verification is especially serviceable in comparing recorded proceedings with existing assets. Large companies often speci fy independent internal verification to internal auditors. Internal auditors are company employees who ceaselessly evaluate the effectiveness of the companys internal control systems. They review the activities of departments and individuals to experience whether prescribed internal controls are existence followed. They also recommend improvements when needed.Human pick controlsHuman imagery control activities take on the followinga. Bond employees who like cash in Bonding involves obtaining indemnification protection against larceny by employees. It contributes to the safeguarding of cash in two ways First, the insurance company guardedly screens all individuals before adding them to the policy and may reject risky appli tushts. Second, bonded employees hold up that the insurance company will vigorously mesh all offenders. b. Rotate employees duties and require employees to take vacations these measures deter employees from attempting thefts since they will not be a ble to permanently conceal their illegitimate actions. c. Conduct by dint of setting checks about(prenominal) believe that the most important and twopenny-halfpenny measure any business place take to reduce employee theft and sendup is for the humankind choices department to conduct through background checks.2. Advice the death chair of what the company is doing right (they are doing some things well) and also recommends to the chairman whether or not they should buy the unerasable ink gondola. When you advise the President, please be sure to reference the applicable internal control principle that applies. Some of the things that the company is doing right area. Documentation procedures The governance uses pre numbered invoices. Documents provide evidence that transactions and events ca-ca occurred. This internal control activity says that whenever possible the companies should use pre numbered documents and all documents should be accounted for. Pre numbering helps to prevent a transaction from being recorded more than once or conversely from not being recorded at all. This control measure helps to ensure timely recording of the transaction and contributes directly to the accuracy and reliability of the accounting records.b. Establishment of responsibility The organization uses petty cash. Employees are asked to place a note if they use any of the cash. This is according to the internal control activity Establishment of responsibility. This is an essential principle of internal control is to assign responsibility to specific employees. Control is most effective when only one person is responsible for a given task. This limits access only to authorized personnel. c. While interviewing, the president and the accountant do it together. It is good to spend a penny more than one people in an interview. d. The fact that he realizes the issues of any problemsThe president should not buy the ineradicable ink machine, because anyone in the company will spend a penny the access to print. The president has to voluntaries himself and decides about the indelible ink machine. He need not wait for authorization from anybody on instalment this indelible ink machine. 3. Advice the president of what the company is doing wrong (they are definitely doing some things poorly). Please be sure to let in the internal control principle that is being violated along with a pass for improvement. Some of the things that the company is doing wrong area. Meeting in a public place to discuss. This should happen in a private room. b. Physical control The attach to does not follow the physical control activity. The company does not slang individual passwords to restrict access. The use of physical controls is essential. Physical controls relate to the safeguarding of assets and enhance the accuracy and reliability of the accounting records. The organization should have individual passwords for all employees. c. Establishment of responsibility The guild does not follow the internal control activity of establishing responsibility. The indelible ink machine is a wrong option because anyone cornerstone use the machine to print. An essential principle of internal control is to assign responsibility to specific employees. Control is most effective when only one person is responsible for a given task.d. Human resource controls The organization does not follow the human resource controls internal activity. Among the human resource controls internal activity, they do not follow the conduct staring(a) background checks. The company did not do background check. The employee did crock and was a convicted felon who served time for molesting children. Conducting thorough background checks is the most important and tuppeny measure any business can take to reduce employee theft and fraud for the human resources department. The two tips are 1. oppose to see whether job applicants actually have from the schools they list. 2. Never use the telephone rime for previous employees given on the reference sheet always look them up yourself. The company must conduct background checks when recruiting.e. They have faith in their long term employees. The long term employees know well about the organization f. Establishment of responsibility The organization does not have a responsible person for issuing the pay checks. This is an essential principle of internal control to assign responsibility to specific employees. Control is most effective when only one person is responsible for a given task. The company leaves the payday checks in the status for pick up. The paychecks should be mailed each or it should be deposited directly into the employees account. Else one person should have the responsibility to handle the paycheck on pay day.g. Segregation of duties It is an indispensable internal control system that the organization is not following. The two common applications of this principle are Different individual s should be responsible for related activities and the responsibility for record keeping for an asset should be make out from the physical custody of that asset. Making one individual responsible for related activities increases the potential for errors and irregularities. The custodian of the asset is not likely to convert the asset to personal use when one employee maintains the record of the asset and a different employee has physical custody of the asset. In a company, same person cannot be both the treasurer and controller. The duties of the employees must be segregated clearly. h. Physical control Use of physical controls is essential. Physical controls relate to the safeguarding of assets and enhance the accuracy and reliability of the accounting records. in that location is no internet security in the company. They should have proper internet security.