Explain how companies can benefit from assessing their internal control procedures.
How can internal control procedures be used to effectively safeguard a company's cash? Explain.© BrainMass Inc. brainmass.com October 24, 2018, 10:34 pm ad1c9bdddf
The system of internal control is designed to provide reasonable assurance to the audit committee, the shareholders, and the independent auditors that three basis objectives are being met:
1. Effectiveness and efficiency of operations
2. Reliability of financial reporting
3. Compliance with applicable laws and regulations
Your question focuses on reliability of financial reporting, but each objective is assessed in terms of the following five components. In light of recent failures, the five components are being expanded to 20, but we can work with these for your cash problem.
1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
Now, a sentence or two about each component as it relates to safeguarding cash.
The control environment is all about the total system of ...
The solution first lists the components and objectives of a system of internal control. Next those components are assessed in specific terms of safeguarding cash. It took 506 words to get all that written down.
There are different internal control models. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) model is one that is widely accepted by companies in the United States. This model is discussed in Hunton, Bryant, and Bagranoff. Please review each component and share your thoughts with examples.
"Pricing is a very important factor, because information systems are supported to be more efficient and if the system costs more than the company gains over the long-term the system can be a failure ." is right on target. It also important for a company to make sure whether it is worth the effort before it embarks on a project.
To build on the topic I raised in a previous post (above), Internal Controls are one of the most important components of an Accounting Information System. Implementing Internal Controls involves evaluating the expected costs and the expected benefits. Bagradoff, Simikin, and Strand illustrate a cost-benefit analysis of payroll validation control procedure.
Share your organization's experience concerning components considered during cost-benefit analyses of similar control procedures?View Full Posting Details