Acc 544 – Assessing Internal Controls
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Assessing Internal ControlsMargaret DavisACC 544April 24,2017Miriam ShealyAssessing Internal Controls When one considers internal controls, they think of effective and efficient procedures and measures taken to help a company meet goals, financially, and ensure that policies and procedures are followed. These controls are most effective when they are applied throughout the entire company and not just one department. There are no systems of internal control that are the same, because all companies are different and operate in different manners. When internal controls are established they should all be documented to have a proper audit trail, which should be managed by management. When audited, the accounting firm will give opinions of the efficiency of controls put in place. Both public and private sectors utilize internal controls to keep their company afloat. A report was requested by Chief Financial Officer and it will consist of the following focus points; Detecting and Reporting Control Deficiencies, Plan for Analyzing Internal controls, and lastly Financial Reporting and Regulating Requirements for Public and Private Sectors. Background Public and private sectors have different ways of providing information and effectiveness of internal controls within their businesses. It is important that public sectors have necessities and only report publicly on their internal controls, and its effectiveness and discovery of material weakness. On the other hand, private sectors are obligated to only report their internal controls and their submission to the procedures put in place within the private rim of things. Stakeholders within in a private sector may ask for internal control reports and management should be able to provide. Stakeholders hold a very valuable position within a company, therefore them having a heard opinion when dealing with internal controls is important. There are different criteria for identifying and recording of control deficiencies with a precise and clear strategic plan to analyze the internal controls put in place. Since long ago, private sectors documenting does not show the needs of reporting internal control unless it is told by a regulator to do such. Nonetheless, private sectors are liable for attaining opinions from auditors, on the efficiency and effectiveness of financial reporting and its internal controls. The reports are supplemented by the affirmation of management on the effectiveness and efficiency of the controls put in place, same as the public reporting model shown in the public sectors. Detecting and Reporting Control Deficiencies The criteria for recognizing and reporting control deficiencies is a step by step procedure. The first step is to determine if a significant deficiency has taken place. When doing the evaluations of the deficiencies, possible greatness (material weaknesses, significant deficiencies) is in site of the possible influence on annual and in the mist of time financial statements. The possible extent of a misstatement of yearly or in the mist of time financial statements of not more than inconsequential results in the deficient control being named. Possible influences can be found on a gross documented presentation, balanced intro, or other procedures that fit, and reflect the likelihood of a misstatement. If a control is effectively diminished as a control deficiency, it can be classified as the only occurring deficiency, whereas a such system of recognizing the existence of a deficiency can be helpful in documenting and improvement of the deficiency. The main control deficiencies that can be concluded over being are put within the insufficient portion of the documents of the areas necessary for the internal control.
Step two of the process is determining if the weaknesses of the material exist. The possible degree of the error documented in the annual portion or the in the mist of time portion of the report, that is not as much as material outcome in the lacking control be an insufficient record. The possible degree may be found on the gross portion of a presentation, balanced intro, or other appropriate tactics that reflect the likelihood of error. In the event of reporting the deficiencies, there would be automation of system controls through IT software development, which is basically an application controls automated control methodology. These may include, counts, presenting on accounts, era of reports, and control schedules. The manual controls will be reliant on IT, where surveys by the inventory manager would be relayed on an exception report that would also be generated by the IT. Basically, the IT is developed to initiate, authorize, document, manage, or document switches on financial related data on behalf of insertion within the financial records, the bases and developments may contain controls known alongside the corresponding statements for vast accounts or circle closures or might be simple to the effective functioning of physical controls that depend on IT. Furthermore, compensating controls may be used in reporting of the deficiencies control that works at a level of accuracy. This would bring about the counteractive action or location of a misstatement that was more than irrelevant or material, as pertinent, to annual financial related statements. The level of accuracy should be set up considering the probability of further undetected misstatements.Plan to Analyzing Internal ControlsThe initial step of starting an internal control, would be to gather information that will assist with the financial statement. The information gathered will essentially come from the company, what shown maybe strong or weak, as per the pan an assessment need to take place. The assessment of the internal controls has an internal auditor that determine of the what is suitable within the control procedures and what can be altered or eliminated. The auditor will also note any special cases that may arise during the analyzation. Control exceptions only exist when the test resistant results show that the swayed control has not been performed as stated within the recorded records. On the assumption that an exception will be detected, the use of chart 1, which is how one would determine if the special case is not less than the control deficiency. A great example of this would be, when expecting an internal auditors test of a day by day system is interrupting reports and has a finding of a report out of a group of 20 was not properly checked. From the time when, the internal examiner expected that all 20 reports would illustrate survey confirmation, an assessment of this will help appraise each report for reliability. Another example would be: