...Checklist for Evaluating Internal Controls Checklist for Evaluating Internal Controls Table of Contents Budgets and Planning 1. Segregation of Duties 2. Procedural Controls Cash 1. Segregation of Duties 2. Procedural Controls Revenues and Receivables 1. Segregation of Duties 2. Procedural Controls 3. Billing and Remittance Verification Capital Assets 1. Segregation of Duties 2. Procedural Controls Procurement and Payables 1. Segregation of Duties 2. Procedural Controls Payroll 1. Segregation of Duties 2. Procedural Controls Electronic Data Processing 1. Segregation of Duties 2. Procedural Controls Financial Reporting 1. Segregation of Duties 2. Procedural Controls Checklist for Evaluating Internal Controls Overview Organizations, whether for profit or non-profit, assess the effectiveness of internal controls. The most efficient way to gather information and evidence about the internal controls of an entity is to conduct an interview with the managers using a checklist form of internal control questionnaire (Louwers, 2007). The preparer of the checklist should include questions about each significant assertion in order to obtain evidence about the control environment. Answers to the internal control questionnaire are in the form of yes or no; no usually indicates some weakness or control deficiency. Policies and Procedures A. Segregation of Duties Yes/No Comments 1. Does your organization have an organizational...
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...A Checklist for 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...
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...Checklist for Evaluating Internal Controls Internal Controls can be easily evaluated by making use of a comprehensive questionnaire containing all pertinent components of the internal control system in place within the company or business unit. The idea of the internal control questionnaires is to provide auditors with wealthy information in regards to the controls in place and possible risky areas. “Internal control questionnaires are designed to help the audit team obtain evidence about the control environment and about the accounting and control procedures that are considered good error-checking routines. Answers to the questions, however, should not be taken as final and definitive evidence about how well control actually functions. Evidence obtained through the interview-questionnaire process is hearsay evidence because its source is the supervisor, not the person who actually performs the control work. This person could give answers that reflect what he or she believes the system should be rather than what it really is. The person can be unaware of informal ways in which duties have been changed or can be innocently ignorant of the system details. Nevertheless, interviews and questionnaires are useful when a manager tells of a weak feature. An admission of weak control is fairly convincing” (Lowers, et. Al 2007). On Appendix A of this paper, an example of an Internal Control Questionnaire is provided. It is general by nature, but it can be easily customized to any company/industry...
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...Checklist for Evaluating Internal Controls Darius Perrin ACC/544 Checklist for Evaluating Internal Controls According to Investopedia (2013), internal controls are methods implemented by a company to ensure the organization is meeting their profitability targets efficiently while also keeping the integrity of the company. The following discussion will outline the three phases of the control evaluation which is understanding the documenting the internal control, assessing the control risks, and performing tests of the controls and reassessing control risks. Phase 1: Understand and Document Internal Control Phase 1 allows the auditors to work efficiently by getting a basic understanding of the organizations internal control. There are five components to internal control: control environment, risk assessment, control activities, monitoring, and information and communications. The following checklist will allow the audit team to gather evidence and focus their efforts in reviewing what aspect is at more risk and requires more review (Louwers, 2007). Yes/No Comments Control Environment Evaluation 1. Is there a written code of conduct displayed for employees to view? Yes 2. Are all employees aware for their goals as an individual? Yes 3. Is there a written document describing each employee’s job description? Yes 4. Would you consider your financial reporting attitude to be conservative? Yes 5. Are actions taken when an employee is found acting...
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...Checklist for Evaluating Internal Controls Control Environment Department: Preparer: Date: Please Enter Date here Yes No NS N/A | Checklist Questions | | 1. Are the company shareholder's approved of the project? | | 2. Is the company management approved of the project? | | 3. Has the employee's involved been fully informed of the project? | | 4. Does the project follow or improve the company's mission? | | 5. Does the project have a mission? | | 6. Has accounting reviewed the project? | | 7. Has accounting provided a report on the costs of the project? | | 8. Is the company ready to introduce the project? | | 9. Are the management and employees ready to work on the project till complete? | | 10. Does the project interfere with any Human Resource policies or procedures? | | 11. Are the employee's working on the project knowledgeable about the skills needed? | | 12. Has the Project Manager been chosen? | | 13. Can an internal audit be done on the project later? | | 14. Are all the three phases being followed? | NS = Not Sure N/A = Not Applicable Risk Assessment Department: Preparer: Date: Please Enter Date...
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...Checklist for Evaluating Internal Controls Lisa Cook ACC 544 October 31, 2011 Bret Mann Checklist for Evaluating Internal Controls Internal Control is to assist companies with reviewing and assessing its accountability within the organization. Internal controls are best practices for an organization that sets the tone and its main purpose is reducing business risk by controlling loss because of the misuse of the company’s assets. Fraud is sure to be detected through internal controls as well as help with the accuracy of its financial reporting. This analysis will provide a comprehensive checklist for evaluating internal controls and show how to apply the checklist to outline phases of the control evaluation. Evaluating Internal Controls Checklists The Committee of Sponsoring Organization (COSO) defines controls as the “process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following three categories: * Reliability of financial reporting. * Effectiveness and efficiency of operations. * Compliance with applicable laws and regulations. Internal control is designed to achieve objectives in various categories” (Louwers, et al, 2007, p. 149). The purpose for an internal control checklist is to analyze the efficiency of the organization’s controls in place, document the controls, and make recommendations and necessary improvements. Management...
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...Checklist for Evaluating Internal Controls Internal control evaluation checklists are meant to help a company assess the structure within the organization. An effective internal control guarantees the integrity of financial reporting. There are five components of an internal control system, which include: control environment, risk assessment, control activities, information and communication, and monitoring. Not only are there five components, but there are three phases, understanding, assessment, and testing. This checklist helps to assure that control objectives are achieved with cost-benefit consideration. Auditors will need to consider the five components within the three phases of the internal control evaluation. Below is a sample checklist for the internal control of a company: Client Name ____________________________________________________________ _____________ Prepared by ____________________________________________________________ _____________ Date Prepared ____________________________________________________________ ___________ Internal Control Checklist Phase I Understanding Internal Controls Control Environment: 1. Do employees clearly understand the mission of the organization? 2. Do employees understand their objectives? 3. Do employees clearly understand what they are accountable for? 4. Are the principles of integrity and ethical values shared and practiced by all? 5. Is a current organizational chart maintained and followed...
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...Internal Control Evaluation An auditor uses a checklist template when conducting an audit of internal control. The auditor will assess the financial condition and internal procedures. Internal control process must comply with industry standards and regulatory requirements. Corporations must prepare responses to auditors and should have an internal control system in place. “Five components of internal control are considered to be criteria for evaluating a company’s financial reporting controls and the bases for auditor’s assessment of control risk as it relates to financial statements” (T. Louwers, R Ramsay, D Sinanson, J. Strawser, 2007 p. 163) The internal control evaluation has three phases in which an auditor uses to form assess the corporation and form an opinion. Phase 1 Understand and Document the Client’s Internal Control The primary objective of Phase 1 is to become familiar with the work and control environment. The auditor must learn the control environment by setting up interviews with staff. Auditor should ask specific questions about the flow of transactions in the accounting system. The corporation should provide the auditor with the design of the control procedures. To examine the control environment and complete an evaluation, the auditor will contact the Human Resource Department for a copy of the code of employee conduct and performance methods. The organizational chart will help the auditor identify management team and area of responsibility. To measure...
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...Comprehensive Checklist for Evaluating Internal Controls ACC/544: Internal Control Systems Comprehensive Checklist for Evaluating Internal Controls As defined by the COSO framework, there are five elements that are used to explain an internal control system applied in an organization. These elements include: 1. Control Environment – The control environment is the foundation for the other four components of internal control. It outlines discipline and structure for the internal control method and consists of philosophy, ethical values, operating style, risk appetite, functioning of the board, and organizational structure (Louwers, Ramsay, Sinason, & Strawser, 2007). 2. Risk Assessment - This component evaluates the way in which an organization decides to handle the number of always-evolving external and internal risks. 3. Control Activities - This component seeks to ensure that the directives of management are carried out. These are computerized and manual and serve the purpose of preventing, detecting, and correcting errors (Louwers, Ramsay, Sinason, & Strawser, 2007). 4. Information and Communication – The information and communication component provide managers with the critical information necessary for achieving objectives. This component seeks to provide information that is timely, reliable, and relevant. 5. Monitoring – Assessing the quality of the established controls is essential to motivate continuous progress of the internal control method. ...
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...Checklist for Evaluating Internal Controls There are five components to internal controls. A comprehensive checklist should adequately define these components and ensure that each component has been adequately met. According to Louwers, Ramsay, Sinason, and Strawser (2007) the five components to internal controls include: 1. Control environment – Involves the tone of the organization and includes “the integrity, ethical values, and competence of the company's people” (Louwers, Ramsay, Sinason, & Strawser, 2007). 2. Risk assessment – Involves a thorough assessment which “identify(s) risks, estimate their significance and likelihood, and consider how to manage the risks” (Louwers, Ramsay, Sinason, & Strawser, 2007). 3. Control activities – Involve specific actions which help ensure that management’s objectives and expectations are carried out. 4. Monitoring – Ongoing evaluation of internal controls performed on a timely basis. 5. Information and Communication – Relates to the efficiency and reliability of information and communication refers to how the information is presented to communicated to users. |Defining the Control Environment |Yes/No | |Is there a clear method of assigning authority and responsibility? | | |Is there a clear transparency within the audit trail? ...
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...[pic] |Course Syllabus School of Business ACC/544 Internal Control Systems | |Copyright © 2010, 2009, 2008 by University of Phoenix. All rights reserved. Course Description In this course, students gain a broad perspective of accounting and control that considers attainment of all goals of the organization, including those concerned with financial objectives. Topics include an overview of control, risk management, internal control systems, controls for current asset functions, controls for other accounting classifications, controls for information technology systems, and reporting on controls. Policies Students will be held responsible for understanding and adhering to all policies contained within the following two documents: • University policies: You must be logged into the student website to view this document. • Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning of each class. Policies may be slightly different depending on the modality in which you attend class. If you have recently changed modalities, read the policies governing your current class modality. Course Materials Louwers, T. J., Ramsay, R., Sinason, D., & Strawser, J. (2007). Auditing and assurance services: A look beneath the surface (2nd ed.). New York, NY: McGraw-Hill. McCarthy, M. P. & Flynn, T. P. (2004). Risk from the CEO and board perspective: What all managers...
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...Devry University LJB Company Internal Controls Eddie Daniel Velez ACCT 504 Professor Ramiro Serrano August 10, 2014 Table of Contents Introduction………………………………………………………………………………………..3 Public Trading……………………………………………………………………………………..4 Internal Controls…………………………………………………………………………………..5 Current Concerns………………………………………………………………………………….6 Summary…………………………………………………………………………………………..8 Works Cited……………………………………………………………………………………….9 Introduction: This report is used for the purpose of evaluating internal controls with the company stated: LJB Company Inc. LJB plans on going public in the near future and has enlisted the help of Serrano Accounting Services (SAS) to prepare a formal document discussing changes that need to be made in the company before going public is plausible. This report will discuss some of the current procedures at LJB with the proper recommendations to help streamline the process of becoming a public company along with any concerns the President might have and wishes to have addressed. Public Trading: LJB wishes to move forward and become a publicly traded company. First of all I want to thank for choosing SAS with all of your accounting needs. We are honored to help with this report and hopefully future endeavors. First we will review any regulations regarding private companies converting to public entities. One of the many added benefits of going public is it shows consumers, and investors a strong corporate governance. Under Sarbanes–Oxley...
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...The Internal Assessment Chapter Four Chapter Objectives 1. Describe how to perform an internal strategicmanagement audit. Discuss the Resource-Based View (RBV) in strategic management. Discuss key interrelationships among the functional areas of business. Identify the basic functions or activities that make up management, marketing, finance/accounting production/operations, research and development, and management information systems. Copyright ©2013 Pearson Education 4-2 2. 3. 4. Chapter Objectives 5. Explain how to determine and prioritize a firm’s internal strengths and weaknesses. Explain the importance of financial ratio analysis. Discuss the nature and role of management information systems in strategic management. Develop an Internal Factor Evaluation (IFE) Matrix. Explain cost/benefit analysis value chain analysis, and benchmarking as strategicmanagement tools. Copyright ©2013 Pearson Education 4-3 6. 7. 8. 9. A Comprehensive StrategicManagement Model Copyright ©2013 Pearson Education 4-4 Key Internal Forces Distinctive competencies A firm’s strengths that cannot be easily matched or imitated by competitors Building competitive advantages involves taking advantage of distinctive competencies. Copyright ©2013 Pearson Education 4-5 The Process of Performing an Internal Audit The internal audit Requires gathering and assimilating information about the firm’s management, marketing, finance/accounting, production/operations...
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...Internal Auditing * Gives you insight into compliance issues, risk assessment, fraud prevention, corporate governance, IT auditing, and many other topics, plus summaries of current audit research, case studies, and feedback on new initiatives and standards from COSO, the Institute of Internal Auditors (IIA), and other organizations. * An independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Differences Mandate: Although Internal Audit does have a degree of focus on the financial aspects of the organisation, it is essentially not a financial discipline - unlike its counterpart External Audit. Its multidimensional nature mandates a much broader scope in the organisation than that of External Audit. * EAs have a statutory obligation to shareholders and the public on the accuracy of the annual report and the financial statements * IAs has a duty to senior management and the board via the audit committee on the state of governance, risk management and control within the organisation. Areas of Focus: * EAs focus on finance and accounting * IAs focus on the whole organisation, all departments, functions and operations Independence: * EAs are independent external assurance providers to the organisation...
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...Control Self-assessment for Information and Related Technology To ensure smooth functioning of an enterprise striving to achieve predetermined objectives, business processes are identified and defined. To ensure the proper completion of process work, procedures are defined, documented and established. Business procedures need to be properly controlled to ensure smooth completion. Out-of-control procedures are expensive; therefore, controls need to be in place. These controls can be preventive, detective and/or corrective in nature. However, the adequacy of controls over procedures depends on various factors, including a balance between costs incurred for implementing controls and the resulting benefits derived. Many controls are essential overheads for the business, and therefore, their effectiveness must be reviewed periodically. Internal audit of controls, an essential overhead, helps avoid relaxation on controls. Ultimately, the control overheads constitute a major expenditure item. Assurance that the controls are in place and effective is essential. This assurance can be given through control self-assessment (CSA), also referred to as control self-assurance. Systems and procedures for many business organizations within various sectors have evolved over time. For example, banking is the oldest service sector and the controls over banking procedures are essential not only for the bank, but also for society in general. Controls in banking procedures have also evolved over...
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