Internal controls are policies and procedures a company uses to guarantee the truth and cogency of their informations. Hazards are menaces to that informations that could be internal or external of the company ( Hunton. Bryant. & A ; Bagranoff. 2004 ) . The undermentioned paragraphs will place and analyse the hazards and internal controls as they relate to the information systems for Kudler Find Foods. This will give Kudler information on how to measure hazards and the application of the internal controls and this papers will discourse other external hazards associate with purchasing a new accounting information system ( AIS ) .
Identifying and Analyzing Risks There are many types of hazards that a company has to face each twenty-four hours in information engineering ( IT ) . The four chief types of hazard are concern. audit. security. and continuity hazards. A concern hazard is when a company will non be able to accomplish its ends and aims ; this could be brotherhood issues. a viing company. fraud. or production equipment failure. Audit hazards include misstatement of financials by an hearer or a failure by an hearer to bring out fraud or material mistakes.
A security hazard can be a host of things that would destroy the unity and entree of the information. which can besides take to fraud or abuse of other information from internal ( like employees ) to external ( like hackers ) beginnings. And. eventually. continuity hazards are information system risks that have to make with backup. recovery and twenty-four hours to twenty-four hours handiness of the system. When unplanned hazards occur. direction and hearer need to move rapidly to stop the hazard. equilibrate the hazard with cost-efficient countermeasures. since it is impossible to be after all hazards ( Hunton. Bryant. & A ; Bagranoff. 2004 ) .
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It is of import to thoroughly measure the AIS selected for hazards as it includes confidential client. seller. paysheet and corporate information within the maestro databases. The types of hazards associated with Kudler’s new AIS system are system apparatus. informations transportation and execution issues. the AIS transcending waiter capacity. other engineering issues. and internal security breaches such as fraud. loss. or abuse of informations.
Typically the hazards to AIS systems are chiefly internal menaces. as processing occurs behind the Company’s firewalls and system entree is normally limited to merely company employees. Kudler has multiple shops. so it might be web-enabled. leting seller users and employees to entree the system over the Internet. which will expose their system to external menaces. This increased connectivity might do unauthorised entree easier for hackers and hence informations loss. industrial espionage. fraud and system outages could happen every bit good ( Goldenberg. 2011 ) .
Internal controls are critical to set into topographic point from this point of measuring the hazards. Identifying and Analyzing Internal Controls The intents of internal controls for an AIS are to protect the informations resources against fraud. harm. and loss. It is besides to guarantee truth. cogency. and dependability of the financials and runing informations. which will assist Kudler to remain compliant with its policies and processs of the company and do better determination devising schemes.
For best concern patterns. internal controls need to be put into topographic point. as the hazards are many for Kudler. but in order for direction to document their apprehension of internal controls. they should utilize a flow chart to high spots hazard issues and countries necessitating control. Attached are Appendix A. B. C. and D Data Flowcharts for Kudler. On these charts are highlighted countries of possible hazards and possible internal controls to set into topographic point ( Apollo Group. 2013 ) . The first measure to developing an effectual internal control system is to place the countries where development or mistakes are likely to happen.
Separation of responsibilities is the key to extinguish many deceitful concerns environing accounting and finance. No employee should manage more than one of the undermentioned duties: record maintaining. mandate. rapprochements. and detention of assets. The undermentioned countries in accounting should besides be reviewed for internal hazards: * Cash grosss and expenses: This will include sedimentations recorded and made quickly to the bank. cheques signed and reviewed by direction. petty hard currency secured and roperly recorded. bank rapprochements are done monthly and reviewed by Management. AP and AR maestro informations files are secured with terminal user controlled watchwords.
* Payroll: This will include that all paysheet alterations should be approved by a supervisor. that expenses are for existent employees. and revenue enhancement filing are filed in conformity. * Fixed Assets: This will include all purchases of Fixed Assets are decently labeled and recorded and are used entirely for work intents. should be reviewed by Management monthly. Ordering ( Inventory ) : This will include all orders are approved before puting. audits are done of stock list on a regular basis. and stock list is decently recorded in conformity with depreciation agendas. * System alterations: Blessing of all alterations that will happen to the system must be assigned by the Security Administrator to the Programmers and the Programmers must work with the terminal users for the alterations and so acquire blessing from Management before implementing the alterations ( BDO Consulting. 2009 ) .
Controls Outside of the System Other controls outside of the system that Kudler should measure for hazards and betterment could be environmental controls. such as physical entree to the edifice or public-service corporations. or operational controls. such as forces policies. strategic planning. disposal. and supply concatenation. or even repute controls. such as internal or external communications and media issues.
Achieving apprehensible concern controls on any degree requires Kudler to clearly province processs for managing each country. including a system of cheques and balances in which segregation of responsibilities has been established from get downing to stop of the procedure. Management has the duty for puting a tone and grade of answerability and clearcutness sing the company’s assets and duties. Management fulfills that duty in portion by O.K.ing many facets of the internal controls ( Disaster Recovery Journal. 2011 ) . Decision
It is the duty of Kudler Fine Foods’ direction to understand. proctor. and control hazards. This papers has shed some visible radiation on possible hazards the company could confront. but being prepared for all hazards is impossible. Evaluating and implementing a system of internal controls allows the company to hold peace of head that the organisation is able to cover efficaciously with pull offing its informations. resources. and operations from certain hazards. Internal controls besides support dependable coverage and conformity with Torahs and ordinances. which are necessary for best patterns in concern.
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