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Justification for Internal Control

In: Business and Management

Submitted By scarhan
Words 659
Pages 3
Justification for Internal Control Paper
Sharmain Carthan
ACC/544
September 1, 2014
Professor Fred Johnson

Justification for Internal Control Paper
A system of internal controls ensures preparation reliable financial statements, compliance with financial regulations, reduce risks, and identify and achieve short and long-term goals. Management uses internal controls to adapt to economic changes (AICPA, 2011, p. 2). Although there are controls in place with insurance and portfolio approaches, an efficient and cost effective internal control system is still needed. Insurance and portfolio approaches that manage and analyze risk and both plays an intricate part in the internal control system.
It is important to have an effective internal control system because with Sarbanes-Oxley Act the responsibility to ensure that the financial reporting is done accurately and efficiently. The Chief Executive Officer (CEO), Chief Financial Officer (CFO), and other upper level of management have this responsibility and are considered fiduciary. They have responsibilities to safeguard the assets of the company and can be held personally liable. Part of their responsibilities includes plan administration functions such as maintaining the financial books and records of the plan, and filing a complete and accurate annual return/report for your plan. Fraud and errors can occur at any point in the system. That is why it is important to establish safeguards to ensure the fiduciary responsibilities are met.
An integrated internal control system should achieve operational effectiveness and efficiency, relevant and reliable financial data, and verify law and regulation compliance. (AICPA, 2011, p. 4). If the internal control system is integrated, it will assist management in planning, organizing, directing and controlling daily business operations. Recording transactions,...

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