SUMMARIZATION OF FIVE KEY ELEMENTS IN AN EFFECTIVE INTERNAL CONTROL SYSTEM
RASMUSSEN COLLEGE / FINANCIAL ACCOUNTING
Author’s Note: I Nikki Jorgensen am submitting this summary of an effective Internal Control System on this 10th day of September 2011to Gary Snyder’s A140/ACG1022 Section 10 Financial Accounting 1-Summer Quarter.
Internal Control is a comprehensive system that helps an organization safeguard assets, operate efficiently and effectively, ensure proper reporting of financial information, and to be in compliance with any and all applicable laws and regulations. (Kemp, Waybright) (2010) (pg.296) In order to have an effective Internal Control System five key elements must be present. The five key elements required are:
1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring and Internal Control Limitations
The Control Environment sets the tone of an organization, providing discipline and structure. The oversight of operational activities and the ability to make key business decisions should be clearly outlined in the individual job descriptions. All employees should be expected to be competent to a broad range of professional skills which are common in any position in the organization, regardless of role. Management should be setting the tone for ethics within a business so that employees will follow. And last but not least, all employees should receive ongoing training to ensure they are competent and stay competent for the future success of the business.
To have effective risk assessment, a Policy and Procedure team should be assembled. The teams’ role would be to review the existing control environment, identify any potential risks and come up with solutions...