Justification for an Internal Control System
Justification for an Internal Control System
Ginger Lankford
Internal Control Systems
ACC544
Robert J. Cornett, MBA
October 4, 2010
Justification for an Internal Control System Businesses need an efficient and cost-effective internal control system even with insurance and a portfolio approach control in place. Insurance is necessary and the portfolio approach is very effective but is more reactive than preventive. Internal control sets the foundation to ascertain reasonable assurance that company objectives are met. The internal control function is to achieve the following objectives: ♦ Operational effectiveness and efficiency ♦ Revelant and reliable financial data ♦ Verify law and regulation compliance
An integrated internal control system in all the levels of a company will assist management to plan, organize, direct, and control daily business operations and give direction when problems or events occur. Recording transactions, verifying accurate values of the transactions, reconciling and recording transactions timely, and the final summary for posting are important to reduce fraud and asset loss in a company. An internal control system does not provide complete assurance against losses but can provide reasonable assurance by the development of programs to reduce opportunities to commit fraud. The following components are essential to maximize the effectiveness of the internal control system: ♦ Control environment ♦ Risk assessment ♦ Control activities ♦ Information and communication ♦ Monitoring
Management and top executives of companies that have a leadership style of high levels of integrity and ethical standards promotes internal control and assigns authoritative responsibilities to qualified employees. Risk assessment and analysis promotes awareness of issues by identifying internal and external risk factors and increases achievement of company
Ginger Lankford
Internal Control Systems
ACC544
Robert J. Cornett, MBA
October 4, 2010
Justification for an Internal Control System Businesses need an efficient and cost-effective internal control system even with insurance and a portfolio approach control in place. Insurance is necessary and the portfolio approach is very effective but is more reactive than preventive. Internal control sets the foundation to ascertain reasonable assurance that company objectives are met. The internal control function is to achieve the following objectives: ♦ Operational effectiveness and efficiency ♦ Revelant and reliable financial data ♦ Verify law and regulation compliance
An integrated internal control system in all the levels of a company will assist management to plan, organize, direct, and control daily business operations and give direction when problems or events occur. Recording transactions, verifying accurate values of the transactions, reconciling and recording transactions timely, and the final summary for posting are important to reduce fraud and asset loss in a company. An internal control system does not provide complete assurance against losses but can provide reasonable assurance by the development of programs to reduce opportunities to commit fraud. The following components are essential to maximize the effectiveness of the internal control system: ♦ Control environment ♦ Risk assessment ♦ Control activities ♦ Information and communication ♦ Monitoring
Management and top executives of companies that have a leadership style of high levels of integrity and ethical standards promotes internal control and assigns authoritative responsibilities to qualified employees. Risk assessment and analysis promotes awareness of issues by identifying internal and external risk factors and increases achievement of company
References: (2010, July 29). Understand internal controls (White Paper). Retrieved from: http://www.ucop.edu/ctlacct/under-ic.pdf McCarthy, M. P., Flynn, T. P., & Brownstein, R. (2004). Holistic, integrated approaches to risk management. In Risk from the CEO and board perspective: What all managers need to know about growth in a turbulent world (pp. 247-266). Retrieved from https://ecampus.phoenix.edu/content/eBookLibrary2/content/eReader.aspx McCarthy, M. P., Flynn, T. P., & Brownstein, R. (2004). Treatment options. In Risk from the CEO and the board perspective: What all managers need to know about growth in a turbulent world (pp. 85-105). Retrieved from https://ecampus.phoenix.edu/content/eBookLibrary2/content/eReader.aspx