...Running head: Internal Control and Risk Evaluation Internal Control and Risk Evaluation The purpose of this brief is to identify and analyze possible risks, internal control points, design internal controls, evaluate the application of internal controls and discuss other outside controls, that Kudler Fine Foods may need to upgrade the computer systems. Analysis of Risks of Computer Systems After reviewing the previous flowcharts it is recommended that Kudler Fine Foods automate more of its accounts payable, accounts receivable, inventory, and payroll processes and standardize these processes across all Kudler locations. Therefore, increased computer controls will be needed to ensure the security of data. Computer data could be compromised if proper computer controls are not in place. Risks include theft of confidential and sensitive information stored on computer servers such as company bank account information or personnel records of Kudler clientele and staff. If proper internal controls are not implemented breaches of sensitive data stored in folders that are accessible through the Internet will be exposed through file sharing software with the other Kudler locations. Identify risks and internal control points Identifying risks and internal controls are imperative when information systems are used extensively throughout the fundamental business processes. Information systems general controls are the policies and procedures that apply to all...
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...Internal Control and Risk Evaluation – Kudler Fine Foods Lisa Cook University of Phoenix ACC/542 August 15, 2011 Internal Control and Risk Evaluation Internal controls and risk assessments are an integral part for a company 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 none to be a negative event occurring in a company’s productivity. Internal controls are the policies and procedures put in place to reduce unforeseen occurrences associated with the risks. This brief will discuss the risks of Kudler Fine Food’s current Accounting Information System (AIS) evaluated by Team B and incorporate the controls into the flowcharts, design internal controls to mitigate risks to the systems, evaluate the application of internal controls to the systems, and discuss other controls, outside the system, that Kudler Fine Foods may need. Risks in the Systems According to Hunton, Bryant, & Bagranoff (2004), “business enterprises face a variety of risks, including business, audit, security, and continuity risks” (pg. 48). When analyzing Kudler Fine Foods current information system the team found that Kudler lacked internal controls and risk evaluations required to run their information system. Several concerns were brought up as major potential risks. The three risks focused on are those of business, security, and continuity. Several of Kudler’s risks within the...
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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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...CASE STUDY PA503 FUNDAMENTALS OF AUDITING Audit Firm Contact Number JABATAN PERDAGANGAN Programme Section CHAPTER 1 CHAPTER 2 Email Materiality and Audit Risk Corporate Governance PROBLEM SOLVING CLO2 | LD2/P3 Instruction: Please answer ALL questions. | Part 1 NEW CLIENT ACCEPTANCE DECISION Learning Objectives After completing and discussing this case, you should be able to: 1. Understand the types of information relevant to evaluating a prospective audit client 2. List some of the steps an auditor should take in deciding whether to accept a prospective client 3. Identify and evaluate factors important in the decision to accept or reject a prospective client 4. Understand the process of making and justifying a recommendation regarding client acceptance INTRODUCTION Your accounting firm is a medium-sized, accounting firm in Malaysia, formed in 2012, mainly provides auditing and tax services. But it has recently had success in building the information-systems-consulting side of the business. Recently, your group has been assigned for the first time to perform audit engagement procedures for a small and medium-sized company in Malaysia. One of team member has been a senior auditor for the past three years. Your first assignment is to assist an audit partner on a client acceptance decision. The partner explains to you that the prospective client, Unggul Holdings Berhad, is a medium-sized textile company. The partner recently met the...
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...Report and Internal Control Evaluation Date: June 10, 2013 CBA Auditing Firm has audited the balance sheets of Apollo Shoes as of December 31, 2012. In addition, our auditing firms also reviewed statements of income such as shareholders equity, comprehensive income, and cash flows for the same period. Our company also assessed Apollo Shoes financial reporting internal controls based on the Committee of Sponsoring Organizations of the Treadway Commission (COSO criteria) and determined that they are adequate and effective for the period ending December 31, 2012. Apollo Shoes Inc. management holds sole responsibility for maintaining effective internal controls, validity of their financial statements. CBA Auditing responsibility is only to reflect an opinion on management’s assessment, the company’s internal controls, and the financial statements based on the results of our Audit. Our audit was conducted in accordance with the standards set by the Public Company Accounting Oversight Board. These standards require for our organization to prepare and execute the inspection to attain reasonable assurance of whether Apollo Shoes Inc. financial statements are without material misstatements and determine if the internal controls are effective enough over financial reporting for all material aspects. Our audits provide a reasonable basis for our opinion; therefore the audit included the examination of; * Evidence supporting amounts * Implementation of internal controls * Disclosure...
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...Audit Report and Internal Control Evaluation Nathalie Salib University of Phoenix ACC546/PR April 9, 2015 Prof. Rafael Marrero - Diaz ANDERSON, OLDS & WATERSHED Certified Public Accountants Independent Auditor’s Report To the Board of Directors of Apollo Shoes, Inc. We have audited the accompanying balance sheets of Apollo Shoes, Inc. as of December 31, 2007 and 2006 and the related statements of income, shareholder’s equity and cash flow for the two years in the period ended December 31, 2007. Apollo Shoes’ management is responsible for the financial statements presented, for maintaining effective internal control over financial reporting, and for its assessment of internal control. Our responsibility is to express an opinion on these financial statements, an opinion on management’s assessment, and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements including examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the...
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...Kudler Internal Control and Risk Evaluation Internal controls are essential for a company to maintain the security of its property as well as the integrity of sensitive and confidential information. Should Kudler decide to implement and utilize industry-specific software, it would need to evaluate the internal controls and risks associated with these four systems: payroll, accounts payable, accounts receivable, and inventory. Currently, Kudler does not have effective controls in place to minimize security risks and protect its data. The following brief will evaluate the application of internal controls to new accounting system by first analyzing Kudler’s current internal controls, and then recommending steps the company can take in order to strengthen those controls. Risks in the System In order to successfully manage risks, Kudler should first assess the following types of risks: business risks, audit risks, security risks, and continuity risks. Assessing business risks would require Kudler to evaluate its current goals, the actions needed in order to achieve them, and any foreseeable obstacles that would hinder progress. Analyzing audit risks would involve Kudler ensuring the accuracy of its financial statement. Identifying threats to the security of the company’s information system makes up the security risk assessment. Finally, Kudler outline its disaster recovery and business continuity plan to complete its continuity risk assessment. Upon completing the evaluations...
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...Kudler Internal Control & Risk Evaluation In order for a company to be successful and maintain its integrity, internal controls are necessary. If Kudler should decide to utilize industry-specific software, then the company would need to evaluate the internal controls and risks associated with the four systems (payroll, accounts payable, accounts receivable, and inventory). Currently the company does not have any real controls in place to reduce risks. The following information will discuss Kudler’s current internal control risks, ways in which to mitigate those risks to the systems, and evaluate the application of internal controls to the new accounting system. Risks in the System Managing risks is an ongoing process. When considering information technology, and Kudler’s new information system, there are four types of risks to evaluate: business risks, audit risks, security risks, and continuity risks. Kudler’s business risk would be whether the company achieved the goals set for the business. The audit risks would be if the auditor provided accurate a correct opinion that Kudler’s financial statements were accurate and reliable. Security risks involve the integrity of the company. Continuity risks would be if the accounting system had backup and recovery available. In the new payroll system each employee’s time should continue to be entered into the system and be approved by management. It may be a good idea to have the HR manager review each employee’s time against...
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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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...Introduction Internal control methods and measures are adopted to safeguard assets, enhance accuracy and reliability of accounting records, increase efficiency of operations and ensure compliance with laws and regulations. Control environment. The management style and the expectations of upper‐level managers, particularly their control policies, determine the control environment. An effective control environment helps to ensure that established policies and procedures are followed. The control environment includes independent oversight provided by a board of directors and, in publicly held companies, by an audit committee; management's integrity, ethical values, and philosophy; a defined organizational structure with competent and trustworthy employees; and the assignment of authority and responsibility. Control activities are the specific policies and procedures management uses to achieve its objectives. The most important control activities involve segregation of duties, proper authorization of transactions and activities, adequate documents and records, physical control over assets and records, and independent checks on performance. A short description of each of these control activities appears below. • Segregation of duties requires that different individuals be assigned responsibility for different elements of related activities, particularly those involving authorization, custody, or recordkeeping. For example, the same person who is responsible for an asset's...
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...AN EVALUATION OF THE INTERNAL CONTROLS SYSTEM FOR CASH FOR THE CASE OF NAIROBI SMALL BUSINESSES BY CLEOPHAS MUSINGA A Management Research Project Submitted In Partial Fulfillment For The Requirements Of The Award Of Bachelor Of Commerce (BCOM), School Of Business, University Of Nairobi JULY, 2008 DECLARATION This research project is our own original work and has not been submitted for academic purposes in any institution of higher leaning. Name Number Sign CLEOPHAS MUSINGA D33/6646/05 ………………………….. This research project has been submitted for examination with my approval as the university supervisor Signed……………………………. Date…………………………………………. Mr. Abdulatif Essajee Lecturer University of Nairobi TABLE OF CONTENTS DECLARATION i CHAPTER ONE 1 INTRODUCTION 1 1.1 Background of the study 1 1.2 Statement of the problem 5 1.3 Objectives of the study 6 1.4 Research questions 6 1.5 Scope of the study 6 1.6 Justification of the study 7 CHAPTER TWO 9 LITERARURE REVIEW 9 2.1 Evolution of internal controls 9 2.2 Components of Internal Controls 12 2.4 Relationship between a firm’s age and internal control 18 2.6 Internal controls in small businesses 19 CHAPTER THREE 21 RESEARCH METHODOLOGY 21 3.1 Research design 21 3.2 Population 21 3.3 Sample and Sampling Technique 21 3.4 Data collection methods 22 3.5 Data analysis 22 CHAPTER FOUR 23 DATA ANALYSIS AND FINDINGS 23 4.1 Introduction...
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...LJB Company Audit Report regarding Internal Control Activity Requirement Evaluation for Initial Public Offering and Indelible Ink Printer Procurement Recommendation Author: Phillip Stevens, Buck Stops Here Accounting Associates Securities Exchange Commission Internal Control Requirement Explanation As part of the Initial Public Offering application process with the Securities and Exchange Commission, companies are required to document and validate their internal control activities including policies and procedures. The internal controls must 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 is also part of internal control “best practices”. The Securities Exchange Commission guidelines for internal control activity validation include one or more of the principles: • Segregation of duties requires that different individuals be assigned responsibility for different elements of related activities, particularly those involving authorization, custody, or recordkeeping. For instance, the same person who is responsible for an asset's recordkeeping should not be responsible for physical control of that asset. • Proper authorization of transactions and activities helps ensure that all company activities adhere to established guide lines unless responsible managers authorize another course of action. Proper authorization...
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...internal control Internal Control BUAC 782 Brendan Conway Shalini Sharma Yi Li Jiayu Shan Xiaoran Wang Introduction As a result of the recent scandals of companies such as Enron and WorldCom, the Sarbanes-Oxley Act (SOX) was enacted to preemptively curb fraudulent financial reporting. Since its enactment, SOX has strengthened requirements of both internal controls and procedures for financial reporting. Internal control is a process where a common goal is achieved by management and personnel to ensure safe guarding assets, as well as the attainment of realistic objectives such as operation, reporting and compliance. (COSO, May, 2013) Strong internal controls assist CEOs and CFOs in meeting their new SOX requirement of personally validating their company’s financial statements for reliability and transparency (Sweeny, 2012) The following presents an overview of internal controls, a real-world example of internal controls in action, and a synopsis of monitoring, which is perhaps the most critical part of a strong internal control system. Five components of internal control The Committee of Sponsoring Organizations (COSO) provides a framework in which to analyze a firm’s internal controls. Below are the five interrelated components of this framework: 1. Control environment - The top management is responsible for setting standards, processes, structure and accountability of the organization, resulting in the establishment of the control environment...
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...The rules of management that SEC had released in June 2003 on internal contual they are1) implement the requirements of section 404 of SOX. 2) Amended the officer certifications required by sections 302 and 906 of SOX. 3) The delayed the originally proposed effective date for filling management’s report on internal control over financial reporting. Managers must implement the establishing and maintains adequate internal control of financial reporting. They must identify the framework of COSO which is a committee of supporting organization of the tread way commission report for internal control. Management must assess the effective of internal control of the recent fiscal year. In the statement the disclosure of any weakness of issuers internal control in financial reporting. The Brass tacks is a six stage approach they are 1) plan and scope evaluation. 2) Document your controls .3) evaluate the design and operating effectiveness of your controls. 4) Identify and correct deficiencies. 5) Prepare management’s report on internal control over financial reporting. 6) Prepare for the independent auditor’s report on management’s assessment of internal control over financial reporting. Under the plan and scope there are (5) to in process is project governance on going management projects. The need to provide suitable framework for internal control. The ability to disciplinary team, trained in the internal control to evaluate and to lead the senior, active management authority...
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...Evaluating Internal Control ACC/544 January 17, 2011 Professor – Robert Cornett Abstract The Sarbanes-Oxley Act of 2002 requires an audit of management’s assessment of internal controls for publicly traded companies. In addition, the evaluation of a company’s internal control system is to assess control risk to give auditors a basis for planning the audit and to provide information useful to management to meet the company’s control mission. Five basic components of the internal control system and three evaluation phases help auditors to validate the complete internal control system. The data are best quantified with the use of an internal control checklist (Louwers, Ramsey, Sinason, & Strawser, 2007). Internal controls represent safeguards that protect a company’s business operations and financial information. Business owners are typically responsible for developing and implementing internal controls for a company. Owners can use internal or external audits to evaluate the effectiveness of internal controls. This evaluation normally follows a standard process of measuring the company’s business operations and financial information (Vitez, 2009). Interview Management Management interviews allow auditors to understand the mindset of business owners and other managers in the company. Interview questions include why the owner created certain internal controls, what the controls are for, do managers understand the purpose of the controls and what...
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