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Interal Control And Risk Evaluation Essay

942 words - 4 pages

Running head: INTERAL CONTROL AND RISK EVALUATION Internal Control and Risk Evaluation Patricia Coleman ACC/542 April 7, 2014 Maryln Fisher In today's society, internal controls are applied to support an organization's managers to become more successfully to release the responsibilities by applying and understanding internal control concepts. Internal controls are most frequently saw as "a lot of red tapes"; however, internal controls have different circumstances when confirming high moral and ethical values which should be communicated in an organization. Internal controls are essentially composed of five interrelated components which are communication and information, monitoring, control environment, risk assessment, and control activities. The four areas of concerns are accounts receivable, payroll, accounts payable, and inventory. The identification of risks in the system, how the risk would be merged into the flowcharts, the internal controls that must be used, and an evaluation of the internal control system, and outside controls must be used. The biggest vulnerability area is accounts receivable because of auditing and accounting perspective this is where the point money is received into the organization. In the flowchart, account receivable is recognizable as the point where payments will be posted. Account receivable has a secondary risk area in which the late charges, interest and other fees are added. The area of payroll is where the main risk concern will always be an individual superseding payroll internal controls. An additional internal control that can be applied by use of flowchart designs will be for authorized individuals having access to the authentic payroll processing function that provide access for authorizations of direct deposit/ or the printing of the payroll checks. Authorization is the main internal control area with accounts payable. The nonexistence of authorization is a major weakness, which can be in the form of control overrides in the AIS and physical form. As associated to the flowchart, there is an important weakness that will exist in the process from the requesting department to other areas. The most significant internal control point is the inventory because of the physical counts corresponding with the AIS records. On the flowchart, inventory is identified as the point where inventory levels are maintained and tracked because of the easy access the area poses the biggest risk. Risks in System The risk with using any accounting software will always have uncertainties. Some of the risks are human error data input, security breaches, and fraud that put increase pressure on management staff in maintaining or achieving financial targets that have intensified the risk of inappropriate accounting or disappointment to disclose associated party transactions. The statement above only means that the organization needs to have security controls that forbid the management from manipulating data for investor purposes....

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