Internal Control Essay Sample

A demand is of import to cognize that all publically traded U. S. corporations are required to keep an equal system of internal controls and processs for fiscal coverage in conformity with the Sarbanes-Oxley Act Section 404. It is the duty of your executives to guarantee there are reliable and effectual controls in topographic point. and hearers from outside the company must turn out to the adequateness of the internal control systems every bit good. This information must be recorded in an internal control study each financial twelvemonth as a portion of the one-year Exchange Act study. The purpose of this act is to cut down the possibilities of corporate fraud by mandating specific processs for fiscal coverage. It is recommended that your company follow the model defined by the Committee of Sponsoring Organizations of the Tread manner Commission ( COSO ) in order to follow with the SOX Act. The first of five constituents of this model is to make the control environment. This refers to the deduction that direction topographic points on a company’s hazard direction and answerability procedures and how they foster an environment of conformity with the company’s internal control systems.

Next. you should carry on a hazard appraisal which is the procedure of placing possible menaces to legal. fiscal or overall operational security. Control activities are another constituent. which includes the actions taken by a company through policies. proceedings and best patterns to maintain assessed hazards to a lower limit. Information and communicating methods should be used to inform and educate your employees on all of the control activities such as administering employee enchiridions and posting information on bulletin boards. The last subdivision should be to carry on self-inspections in order to supervise the effectivity of control activities. In measuring your current degree of internal controls. there are some good patterns every bit good as countries that need fiddling betterment. First. your comptroller is practising good physical control in respects to maintaining cheques in the safe ; nevertheless go forthing them on his desk is non a good pattern. Checks should be secured at all times until they are distributed to the intended parties.

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You should see necessitating all employees to have payroll checks through direct sedimentation. The switch to pre-numbered bills is a good determination and I would besides rede the purchase of the unerasable ink machine. This allows for a good physical control in respects to outgo and will help in forestalling cheque fraud. Another control that needs to be recognized is the direction of junior-grade hard currency. There is no manner to find whether the financess are being stolen or mismanaged. It is runing by a complete award system which leaves the fund vulnerable to larceny. In add-on to the suggested hard currency outgo and physical control betterments. there are forces controls that should be implemented. If your staff may be thin. it is still best to divide responsibilities for a better system of duty. Your accountant’s responsibilities should be separated so that he/she is non entirely accountable for the full accounting procedure. even if it means direction may hold to take on other functions. One critical human resource control that can assist avoid engaging distrustful employees is to carry on background cheques prior to engaging person.

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This would hold saved clip and money with the employee that was discovered sing inappropriate stuffs on company computing machines. Background cheques merely unveil old issues with an person ; there should besides be controls in topographic point so that even if a background cheque is clear. employees will be prohibited from misapplying company financess and equipment. For case all computing machines in your company have unfastened entree and there is no manner to enter or describe precisely which employee used a certain computing machine. the length of clip or the specific content viewed. I suggest you execute computing machine controls such as firewall limitations barricading certain types of web sites that are inappropriate to carry oning company concern. delegating user names and watchwords to allow entree or put ining common entree card readers where employees can merely entree the company computing machines and webs through a separate programmed card with an electronic codification implanted.

In drumhead. there are demands your company will hold to run into should it travel public. which will include internal control policies as regulated by jurisprudence. There good patterns presently in topographic point. nevertheless at that place needs to be considerable betterment in respects to certain physical and human resources controls every bit good as separation of responsibilities. Finally. it’s of import to see that the benefits should transcend the costs needed to put to death an effectual internal control plan and that preventative steps could be less dearly-won than holding to rectify an mistake or recover from a loss. Detecting losingss early and rectifying these mistakes AIDSs in cut downing future hazards of the same sort.


hypertext transfer protocol: //www. sox-online. com/act_section_404. htlm

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