Question

IMA case study: From Sparks to Fired: Ethical and Internal Control Violations Surrounding Business Entertainment Expenses

Using the applicable COSO components, identify the internal control weaknesses in the case and provide recommendations to prevent or minimize their recurrence in the future.

Answer 1

COSO( Committee of Sponsoring Organizations of the Treadway Commission) has been generally adopted as s framework and measurement system of the effectiveness of internal control. Coso components are as follows:

1) Control Environment : This component generally include integrity and ethical values, committment to competence, organizational structure, assignment of authority and responsibility, human resource policies and procedures.

2) Risk Assessment : This component include company - wide objectives ,risk identification and analysis , managing change.

3) Control Activities : This include policies and procedures, application change management, backups abd outsourcing.

4) Information and Communication : This include quality of information, effectiveness of communication.

5) Monitoring : This component include ongoing monitoring, separate evaluations and reporting deficiencies.

Continuous monitoring as per defined in the COSO framework is recommended and is implemented to ensure that internal control continues to operatw effectively. It is always advisable to identify and control internal control on timely basis, provide more accurate and reliable information for use in decision making and also be ini a position to provide certifications or assertions on the effectiveness of internal control.

Analysis of, and appropriate follow-up on operating reports might identify failures in control system, quality assurance reviews of the internal audit department comes as measurement system to control the weaknesses in internal control system and helps to minimize their recurrence (weaknesses) in future.