Accounting systems are, in-part, comprised of the hardware, software and applications that allow for storage of important organizational information-both financial and non-financial. The Sarbanes-Oxley Act has been blamed for adding complexity and cost to overall corporate governance. However, corporate scandals have been around for a long time and will likely continue despite the best intentions and government intervention.
Absolute assurance is not possible because of a number of factors including: These three components define the accounting system framework and should provide businesses with a uniform way in which to use their data and financial information.
Lange noted the following in their article about the SEC statement. An accounting system consists of the following three components: The control environment, risk assessment, control activities, information and communication and monitoring of the controls.
For purposes of clarification, this essay concentrates on discussing "internal controls" as they impact accounting systems and not the electronic storage of financial data. A high level of commitment to ethical values and good business practices should be exhibited at the executive, management and board level to instill employees with a similar attitude to implementing effective controls.
This statement shall also assess the effectiveness of such internal controls and procedures" Sarbanes-Oxley Act Section ," Information systems include data repositories as well as the reports that monitor progress related to operational, financial and compliance objectives.
From a historical perspective, one should consider the following quote: Much scrutiny has been placed on internal controls that monitor financial transactions. What can go wrong?
Internal controls offer guidance, practices and procedures that the accounting system needs to operate within an organization.
Control Environment — This refers to the general attitude of management or others who administer the internal controls of an organization. Public companies must satisfy not only regulatory requirements but also meet stakeholder expectations when setting up and monitoring internal controls.
Internal controls are designed to protect against fraud and abuse, ensure accuracy and timeliness of information, and ensure that an organization is in compliance with regulatory guidelines Internal controls," Analysis, design and implementation.
Control Activities — Refers to activities that provide a "reasonable" level of assurance that the goals and objectives of the organization or a business unit will be met. Who is in a position of risk?
Fitzsimons and Gerard A. The costs of implementation and compliance have steadily risen since and many companies continue to struggle with SEC guidelines for administering Sarbanes-Oxley directives.
These components generally incorporate databases, user applications and the designers and end-users of the entire system. It is the role of the controls administrator to change internal controls to reflect any changes in operational circumstances as they may occur.
The control environment may include background checks for key employees, technical competence of staff and thorough written procedures to support the controls. With increasing frequency, internal controls are put in place to mitigate risk throughout all functional areas of an organization and as such, financial audits are being replaced by enterprise risk audits.
The focus of monitoring should always be on areas of highest risk. What assets are at risk? Information and Communication Systems — Communication lets employees know what is expected of them and how to accomplish given objectives. Internal controls function as the administrative and procedural framework of an accounting system and can be thought of as a sub-system within the overall accounting system.Internal Controls Essay.
Topics: Internal control, Enron, Committee of The second primary of internal controls is to ensure the accounting/finance accounts are chronicled properly. This means that there are no account errors and receivables and payables are recorded appropriately. INTERNAL CONTROL essaysThe purpose of the system of internal accounting controls is to make sure a business is operating according to the policies and plans of management in regards with measures that have a direct relation to the protection of assets and to the reliability of accounting information Save your essays here so you can locate.
The Internal Control Weaknesses At Enron Accounting Essay. Print Reference this. Disclaimer: Internal Control Weaknesses at Enron.
Auditors assess the internal controls of a client to determine the extent to which they can rely on a client’s accounting system. Enron had too many internal control weaknesses to be given here. The Purpose of Internal Controls in the Accounting Process - Internal control is the specific procedures used within a company to safeguard its assets from employee theft, robbery, and unauthorized use and enhanc the accuracy and reliability of its accounting records by making fewer mistakes (Weygandt, Kimmel, and Kieso, ).
The Purpose of Internal Controls in the Accounting Process Essay Words 4 Pages Internal control is the specific procedures used within a company to safeguard its assets from employee theft, robbery, and unauthorized use and enhanc the accuracy and reliability of its accounting records by making fewer mistakes (Weygandt, Kimmel, and Kieso.
Internal controls are all of the protocol and methods by which a company or organization protects its assets and ensures the correctness and reliability of its financial and accounting records.
Tight internal controls are essential to any company that desires confidence in its stockholders and.Download