Internal Control

1572 words 7 pages
Case Study 2 – Internal Control 1. Inform the president of any new internal control requirements if the company decides to go public
Each of the five components of an internal control system is important. Let us focus on the control activities. These activities are the backbone of the company’s efforts to address the risks it faces, such as fraud. The specific control activities used by a company will vary depending on management’s assessments of the risks faced. The six principles of control activities are as follows: a. Establishment of responsibility b. Segregation of duties c. Documentation procedures d. Physical controls e. Independent internal verification f. Human resource controls All
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Pre numbering helps to prevent a transaction from being recorded more than once or conversely from not being recorded at all. This control measure helps to ensure timely recording of the transaction and contributes directly to the accuracy and reliability of the accounting records. b. Establishment of responsibility – The organization uses petty cash. Employees are asked to place a note if they use any of the cash. This is according to the internal control activity ‘Establishment of responsibility’. This is an essential principle of internal control is to assign responsibility to specific employees. Control is most effective when only one person is responsible for a given task. This limits access only to authorized personnel. c. While interviewing, the president and the accountant do it together. It is good to have more than one people in an interview. d. The fact that he realizes the issues of any problems
The president should not buy the indelible ink machine, because anyone in the company will have the access to print. The president has to voluntaries himself and decides about the indelible ink machine. He need not wait for authorization from anybody on installing this indelible ink machine. 3. Advice the president of what the company is doing wrong (they are definitely doing some things poorly). Please be sure to include the internal


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