Internal_Control

Sophia Golden XACC/280Version2 October 10, 2010 Steven German Internal Controls The Internal Control is when a company choose to monitor itself and by monitoring itself the company can increase their decision that certain goals will be met and ensure that the efficiency of operation and legal compliance. The two main goals of the Internal Control are the SAC which stands for Systems Auditability and Control helps the internal auditior relates to the information system and technology (e notes.com). The other main goal is the Cobit it focus on efficiently and monitoring the information systems. It plays the role and impact on the It control and relates to business processes (e notes.com). The Sarbanes –Oxley Act of 2000 affected the Internal Control by the pertain of maintenance records that reasonable detail it accurately, fairly reflect on transactions, and dispositions of assets of the registrant, processing under supervision the registrants principal executive and financial officers. Anyone performing functions may be effect by registrant board of directors by registrant board of director. The Internal Control is also affected because without accurate inventory for fixed assets which is the solid financial reporting of corporate assets, without the fixed assets the Internal Control will go downstream. Once this happen the Internal Control can’t do anything to fix the inaccurate with the assets that was lost, stolen or taken from the services that continue to be depreciation and reported. To establish a good inventory of the fixed assets a company must be sure that the inventory will be conducted by using the same location methods. Some companies find bar-coding fixed assets as it place in the service to reduce errors to ensure physical inventories assets. Some companies can experience a fall in the price of stock due to the release of information about the Internal Control weakness, this is when the stock price is reported below and should be interpreted cautiously (CPA Journal) Many companies earning records and their future earning will influence the price of stocks to a very large extent. Companies also have deficiencies in Internal Control because the change of auditor and they had to reinstate it financial statements. Their stock price fall because of the weakness in materials reported in the connection with auditor change. Companies can also see a fall in stock prices because they didn’t receive reliable financial information (CPA Journal). The Internal Control limitations are mistakes made and human errors in applying policies and procedures, circumvention of control by collusions two or more people (E.G. an employee and vendor). Cost is the final limitation of the Internal Control which means control should not cost more than potential benefits (The COSO framework). Examples of limitations are as listed are 1 Control Environment: is clean lines of authority and accountability that emphasize the importance of internal Control. 2. Risk assessment: clear objectives regarding financial reporting and law compliance functions, control activities independent counting or confirmation of investments. 3. Monitoring: prompt follow up on unusual variances from budget. My main point on Internal Control is understands the processes to implement missions of organization and being in compliance with all the laws and regulations. How do they fix or resolves damages that’s caused by events and how to help stockholder when their stock price is affected by the lack of information on the weakness of the Internal Control operation. Another concern is who those the Internal Control affect and what can be done to fix the problem so it wants happen again. I think that if we understand the three control objectives which are effectiveness and efficiency of operation, reliability of financial reporting and compliance with applicable laws and regulations, we can get a full understanding on how the Internal Control really works. The comparisons of the Internal Control principles are that all of them deals up with cash some way are another. The establishing responsibility is to control most effective when only one person is responsible for a given task, segregation of duties relates duties including physical custody and record keeping, should be assigned to different individuals, independent Internal Verification records periodically verified by an employee who is independent discrepancies reports to management and physical, mechanical and electronic controls stores cash in safes and bank vaults; limit access to storage areas. The mechanical and electronics control principles deals with televisions and monitors, sensors on clothes to prevent thefts, clocks for clocking in to record the time you clock in for that day and the alarm system to stop break in (John Wiley & Sons, 2008