...CHAPTER-2 REAEARCH DESIGN TITLE OF THE STUDY A Study on internal control procedures of HR management towards employees with reference to Advik Hi-Tech Pvt ltd Kolar STATEMENT OF THE PROBLEM There are various controls within the organization that betterment the behavior of the employees for best results. Controls on personal career, development etc is not being given prime importance in many organizations. This may lead to damages to the working of the organization thereby affecting image, reputation and goodwill of the organization. The problem lies in organization not making a sincere attempt to concentrate on such problems. The aim of this study is to analyze and find solutions to these burning issues REVIEW OF LITERATURE A literature is...
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...Term |a) A bank lockbox system | |Which of the following controls would most likely reduce the risk of | |diversion of customer receipts by a client's employees? | |a) A bank lockbox system | |b) Prenumbered remittance advices | |c) Monthly bank reconciliations | |d) Daily deposit of cash receipts | Term |b) Stamped "paid" by the check signer | |To provide assurance that each voucher is submitted and paid only once, the | |auditors most likely would examine a sample of paid vouchers and determine | |whether each voucher is: | |a) Supported by a vendor's invoice | |b) Stamped "paid" by the check signer | |c) Prenumbered and accounted for | |d) Approved for authorized purchases | Term |d) Is responsible for mailing the checks | |In testing controls over cash disbursements, the auditors most likely would | |determine that the person who signs checks also: | |a) Reviews...
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...Objectives of the Auditor: * To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material aspects, in accordance with an applicable financial reporting framework * To report on the financial statements and communicate in accordance with the auditor’s findings Audit Process Overview: * Step 1: Client Acceptance and Retention * Step 2: Risk Assessment (Through understanding client business environment and operations Assess risks of material misstatement Assess Audit Risk) * Step 3: Audit Procedures Planning * Step 4: Test of controls (IF reliance on controls) * Step 5: Perform substantive tests * Step 6: Audit Completion and Reporting Financial Statement Assertions: * Assertions are representations made by management, explicit or otherwise, that are embodied in F/S, as used by auditor to consider the different types of potential misstatements that may occur * Focus on assertions as: * Different risks result in different risks of misstatements affect different assertions (transactions and account balances can be misstated in different ways with different assertions being affected, eg. Fictitious credit sales Occurrence) * Depending on...
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...Summary of Internal Control Definition Chapter 07 Internal Control A process, effected by the entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding, achievement of (the entity’s) objectives on: Effectiveness and efficiency of operations Reliability of financial reporting Compliance with applicable laws and regulations McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. 7-2 Control Objectives In each area of internal control (financial reporting, operations and compliance) Control objectives and Sub objectives exist Foreign Corrupt Practices Act Passed in 1977 in response to American corporation practice of paying bribes and kickbacks to officials in foreign countries to obtain business The Act Requires an effective system of internal control Makes illegal payment of bribes to foreign officials Example: Area of financial reporting Top level objective – prepare and issue reliable financial information Detailed level applied to A/R sub objectives • All goods shipped are accurately billed in the proper period • Invoices are accurately recorded for all authorized shipments and only for such shipments • Authorized and only authorized sales returns and allowances are accurately recorded • The continued completeness and accuracy of A/R is ensured • Accounts receivable records are safeguarded 7-3 7-4 Controls over Financial Reporting Preventive Aimed...
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...Management's attitude toward aggressive financial reporting and its emphasis on meeting projected profit goals most likely would significantly influence an entity's control environment when [pic][pic] A. The audit committee is active in overseeing the entity’s financial reporting policies. Answer A is incorrect. An active audit committee tends to temper management's aggressive stance. [pic] B. External policies established by parties outside the entity affect its accounting practices. Answer B is incorrect. External policies tend to moderate such management tendencies. [pic] C. Management is dominated by one individual who is also a shareholder. Answer C is correct because these noted factors tend to have an especially significant influence on the control environment when management is dominated by one or a few individuals. Such a circumstance allows management to effectively implement aggressive financial reporting and emphasize meeting profit goals. [pic] D. Internal auditors have direct access to the board of directors and entity management. Answer D is incorrect. Internal auditors tend to mitigate management's aggressive attitude. close Control environment. The control environment factors set the tone of an organization, influencing the control consciousness of its people. The seven control environment factors, which you may remember using the mnemonic IC HAMBO, are |I |- |Integrity and ethical values ...
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...Introduction………………………………………………………………………………3 New Internal Control Requirements……………………………………………………4 Positives & Negatives…………………………………………………………………….4 Recommendation on Ink Machine………………………………………………………5 Summery & Conclusion.………………………………………………………………….5 Work Cited………………………………………………………………………………..6 Introduction The purpose of this report is to show the importance of internal controls for LJB Company if it’s decided that the company will go public. Through out the document three major topics will be address. The first being, a reviewing of new internal control requirement before the company goes public. Secondly, an overlook of the positive & negative policies that affects internal control and its procedures, along with recommendations for the negatives. Finally, an advisement on whether or not the company should buy the indelible ink machine. New Internal Control Requirements New requirements have been placed since 2002 for all publically traded US companies and their internal controls, as stated by Walter T. Harrison, Charles T. Horngren, and C. William Thomas in their book Financial Accounting, VitalSource for DeVry University (p. 236). Congress passed the Sarbanes-Oxley Act (SOX) to address and ease the concerns of the public ever since the scandal of Enron and WorldCom. In order to comply with the SOX act the following requirements must be followed: * Public companies must have an internal control report with an evaluation of an outside auditor...
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...Chapter 7 – Internal Controls • Key topics: • Know the broad definition of internal control and its purposes, including the objective that is particularly relevant to an audit (i.e. reliability of financial reporting) A process, effected by the entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations (effective and efficient operations), reporting (accurate financial reporting) and compliance (compliance with laws and regulations) • Describe the 5 components of internal control, related examples of each, and how each contributes to the overall control system within an entity (CRIME) 1. Control Environment: The foundation for the other internal control components; it is defined by the standards, processes, and structures that guide individuals in carrying out their duties. Basic principles include: Commitment to integrity and ethical values, Board of directors demonstrates independence from management and exercises effective oversight of internal control, Establishment of effective structure, including reporting lines, and appropriate authorities and responsibilities, Commitment to attract, develop, and retain competent employees, and Holding employees accountable for internal control responsibilities. 2. Risk Assessment: Risk assessment is management's process for identifying, analyzing, and responding to risks from internal and external sources that threaten...
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...CHAPTER 5 Internal Control Evaluation: Assessing Control Risk LEARNING OBJECTIVES | | | | | |Review |Exercises, Problems, | | |Checkpoints |and Simulations | | | | | |Distinguish between management’s and auditors’ responsibilities |1, 2, 3, 4, 5 | | |regarding a company’s internal control. | | | | | | | |Define and describe internal control. |6, 7, 8 | | | | | | |Define and describe the five basic components of internal control, |9, 10, 11, 12, 13, 14, 15, 16, |62, 66, 69, 70 | |and specify some of their characteristics. ...
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...Control activities Control activities are the actions established through policies and procedures that help ensure that management’s directives to mitigate risks to the achievement of objective are carried out. Control activities are performed at all levels of the entity at various stages within the business process, and over the technology environment. Principles * 3.1 The organization selects and develops control activities that contribute to the mitigation of risks to the achievement of objectives to acceptable levels. Risks regarding electricity * Increase in tariffs * Power cuts or load shedding * Consumers (community) ‘s loss of confidence in the municipality * Inability to maintain networks or power stations and keep in time with technological improvements * Installation of solar systems can also be a risk as this would affect the sales of electricity * Regulatory changes i.e environmental laws * Lack of competent staff * Financial challenges to maintain the system * Competition RISK | CONTROL ACTIVITY | CONTROL ACTIVITY TYPE | Increase in tariffs | Department of mineral and energy allocated funding for the rural electrification | | * Financial challenges to maintain the system * Inadequate operations and maintenance budget | Approved budget | Authorization | Inability to maintain networks or power stations and keep in time with technological improvements | Effective monitoring of system | Independent...
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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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...was a large stepping stone in that movement and has impacted many public companies. SOX requires public companies registered with the Securities Exchange Commission to evaluate the effectiveness of its internal control over financial reporting and disclose this information in its financial statements. For instance, Dell Inc., a large multinational IT corporation, was one of the many large corporations affected by the implications of SOX. First, Section 404 of SOX requires Dell’s management, under the supervision of the CEO and CFO, to establish and maintain adequate internal control in accordance with the rules defined in the Securities Exchange Act. In addition to establishing the controls, they are also required to evaluate the effectiveness of the controls against the criteria established in the Internal Control-Integrated Framework issued by COSO. Second, Section 409 of SOX requires management to disclose material changes in internal control, and the results or potential effects of those changes. Finally, Section 404 of SOX requires Dell’s auditing firm to evaluate management’s assessment of Dell’s internal control and to issue an opinion on the quality and accuracy of the assessment. All in all, SOX raised corporate responsibility to assess and improve internal control over financial reporting. It also...
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...Presented by Citrix Systems 10 essential elements for a secure enterprise mobility strategy Best practices for protecting sensitive business information while making people productive from Learn More The process should not be viewed as a fault finding mission but a determination of whether there was a company, policy, procedure or guideline in place to address this situation, whether the guidelines were followed as designed or adequate to address (or prevent) the specific situation that occurred. If the fraud event occurred because an employee(s) simply failed to follow the internal control policies, then there are corrective measures that business units may take to ensure policies are followed in the future. These include communication to employees regarding increased awareness, correct handling processes and policy adherence. It may simply be that employees performed as expected under the circumstances but there were insufficient internal control policies in place to guide their behavior. Lessons learned here will strengthen internal controls through the creation of new ones. Also learn about the basics of internal investigations A fraud event without in-depth incident evaluation, lessons learned and corrective action generally means that there is an excellent chance the criminals will reload the activity and the company will continue to experience high levels of fraud. A great example of this involves timekeeping amongst non...
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...School DeVry University ABSTRACT There are several internal control requirements that need to be put into place if the company decides to go public. Those principals are establishment of responsibility, segregation of duties, physical controls, independent internal verification, documentation procedures and human resource controls. Establishment of responsibility is making sure that only designated personnel has the authority to handle certain financial responsibilities. Segregation of duties is ensuring that different individuals have different responsibilities. A physical control is having the proper items that need to be secure in a place that has limited access. Independent internal verification is having individuals confirm the information that is received by various departments to make sure there is accuracy in the documents and reports that are being reported. Documentation procedures is using proper documentation to keep records accurate and having supporting evidence for the transactions that had taken place to make sure that fraud has not occurred. Human resource is handling personnel issues such vacations, conducting background checks and issuing bond personnel for the individuals who handle cash. All of these internal control principals are important to protect the company’s assets, increase the effectiveness of the operations and ensure compliance with laws and regulations. These controls also heighten the accuracy and reliability of accounting records...
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...Justification for an Internal Control System Crystal Spencer University of Phoenix ACC/544 Internal Control Systems Christina Yang May 14, 2012 The purpose of this brief report is to justify the need for the internal control system in any organization, when controls are in place with an insurance and portfolio approach. An internal control system in any organization is a way to regulate, to reduce lost, to minimize risks, and to accomplish the organizational goals and success (McCarthy, 2004). The majority of organizations depend on the insurance approach and the portfolio risk management approach. These approaches are used to manage a business risk, whereas some businesses depend on the benefits of an internal control system. I will now explain the two types of approaches insurance and portfolio used in an organization. Insurance approach The insurance approach is generally used to ensure the acquirement to transfer certain types of risks that could affect the business property, the business assets, and affect the employees (McCarthy, 2004). The insurance approach used as a tool to prevent business losses; in addition, it is more like a financial risk tool than management risk tool. This approach will diminishes the impact of the losses, protecting the business assets from potential losses, therefore, making the insurance approach more reactive, than proactive (McCarthy, 2004). Portfolio risk management The portfolio...
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...AUDITING THEORY TESTBANKS / REVIEWERS 1. When an auditor believes that an understanding with the client has not been established, he or she should ordinarily a. Perform the audit with increase professional skepticism. b. Decline to accept or perform the audit. c. Assess control risk at the maximum level and perform a primarily substantive audit. d. Modify the scope of the audit to reflect an increased risk of material misstatement due to fraud. 2. An auditor should design the written audit program so that a. All material transactions will be selected for substantive testing. b. Substantive tests prior to the balance sheet date will be minimized. c. The audit procedures selected will achieve specific audit objectives. d. Each account balance will be tested under either tests of controls or tests of transactions. 3. Which of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle? a. Fictitious transactions may be recorded that cause an understatement of revenues and overstatement of receivables. b. Claim received from customers for goods returned may be intentionally recorded in other customer’s accounts. c. Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash. d. The failure to prepare shipping documents may cause an overstatement of inventory balances. 4. Accepting an engagement to examine...
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