How would you improve weak internal controls to better safeguard a company's assets (provide specific examples of the weak internal control)? Would these internal controls differ with a different type of business?© BrainMass Inc. brainmass.com October 25, 2018, 6:43 am ad1c9bdddf
Safeguarding assets is a primary control procedure needed by every type of business. All businesses have assets even though they will differ greatly in relative size and importance between different types of companies.
The main procedures for preventative actions consist of
1. Separation of duties
2. Proper authorizations
3. Adequate documentation
4. Physical security
The types of assets that require such procedures will follow the balance sheet beginning with Cash and ending with other assets. The closer the type of asset is to the top of the list, the more stringent the controls must be to insure against loss. That's because assets near the top of the pile are most easily stolen.
Using cash for an example, weak internal controls do not provide for separation of duties. That would mean that the person who writes the checks ...
The 542 word solution provides an indepth discussion in response to th questions.
Auditing and internal controls
The following questions might be addressed in an evaluation of internal controls for fixed assets. For each question:
a. Indicate the purpose of the control.
b. Indicate the impact on the substantive audit procedures if the answer to the question indicates weak controls.
Internal Control Questions
1. Does the client periodically take a physical inventory of property and reconcile to the property ledger?
2. Does the client have a policy manual to classify property and assign an estimated life for depreciation purposes to the class of assets?
3. Does the client have a policy on minimum expenditures before an item is capitalized? If yes, what is the minimum amount?
4. Does the client have a mechanism to identify pieces of equipment that have been designated for scrap? If yes, is it effective?
5. Does the client have an acceptable mechanism to differentiate major renovations from repair and maintenance? If yes, is it effective?
6. Does the client regularly self-construct its own assets? If yes, does the client have an effective procedure to appropriately identify and classify all construction costs?
7. Does the client systematically review major classes of assets for potential impairment?
8. Does management periodically review asset disposal or the scrapping of assets as a basis for reviewing the assignment of estimated life for depreciation purposes?