Question

Identify and explain how internal controls for e-commerce would be implemented and how it would then protect the company's assets.

PLEASE NO HANDWRITTEN ANSWERS! I CANNOT TRANSLATE HALF OF THEM!

Answer 1

Answer:- Internal Control will protect company assets as follows:-

Establish Protocols:-

By creating internal controls, small business owners establish protocols and procedures their staff and consultants must follow. Small business owners inform their employees of these protocols and expect that they follow them as they perform their day-to-day work duties. These established protocols help bring order and cohesiveness to companies, as everyone knows what's expected, as outlined in the internal controls.

Prevent Fraud and Theft:-

Establishing internal controls can help companies prevent or reduce fraud and theft within their organizations. Internal controls can include activities such as reconciling bank statements and internal audit reviews, which can uncover whether the company's money is being misappropriated by management or employees.

Separation of Duties:-

Internal controls separate the duties employees have, ensuring that there's a system of checks and balances. For example, a company's internal controls might make sure that an employee who does the company's accounts receivable doesn't also do the company's accounts payable. This can also help reduce internal fraud and theft.

Organize Information:-

Internal controls can help your small business keep its financial and management information organized. Organized data can increase productivity and better prepare your business if you need to produce documents for litigation or if you need to grab information for compliance reviews or audits. This might include giving each employee his own password to access files and data on the company's computer, or creating a system for filing client data and financial documents, online or offline.

Reduce Errors:-

Internal controls can help companies reduce errors, which can help them save money and protect their reputations. Employee training is an example of an internal control that can reduce errors. By training employees on processes and procedures, and updating them on new ones, employees are less likely to make mistakes. Training can include how to use an internal computer program or learning a new work process that exists between departments.

Uphold the Sarbanes-Oxley Act:-

The Sarbanes-Oxley Act stresses the importance of public companies maintaining internal controls when it comes to their financial reporting. The act requires that public companies, small and large, include details on the company's internal controls inside of their annual reports. This information is beneficial to investors and helps prove the integrity of a company's financial data and the management of it.

Safeguard Business Assets with (Better) Internal Controls:-

Therefore, the best way to safeguard your company’s assets is to recognize and improve weaknesses in your internal procedures. The following business practices and procedures can help you minimize potential internal control problems:

• Set the tone at the top: Management must set an ethical atmosphere in the workplace and uphold those values at all times. Employees are more likely to behave in the same manner as management sets.

• Related duties should be assigned to different people: Certain accounting and operational functions are designed to cross-reference each other for accuracy:
  • Writing, signing, and mailing of checks
  • Ordering, paying for, and receiving of materials
  • Handling cash and recording cash in accounting system
  • Accepting customer orders, fulfilling orders, and invoicing customers

    These procedures can reveal inconsistencies in your records in a timely manner.

• Reconcile and scrutinize your bank statements every month: A bank statement can tell you a lot about your business if you review the information in a timely manner. Examine checks and endorsements, track transactions between accounts, compare payroll checks with employee records, and ask questions. Examine bank statements for unusual withdrawals. To be more proactive, consider positive pay systems if your bank offers this service.

• Examine supporting documentation before you sign a check or authorize a transaction: When you insist on reviewing original documentation, your employees become more accurate and communicate their needs more clearly. You should also verify the names of your vendors and your employees occasionally. And remember to cancel supporting materials after signing a check. Consider dual signatures on checks over a certain threshold.

• Lock and protect your valuables: Keep blank checks and signature stamps secured and deposit cash and checks daily. Stamp all checks received “for deposit only”. It’s also important to secure fidelity bonds and insurance for all accounting and key personnel.

• Know your employees and examine behavior changes: Always verify employee references before hiring. Also, consider the need for conducting other background checks as appropriate, including but not limited to the need for credit information, motor vehicle reports, and criminal searches. Many white-collar crimes go unreported and continue to be repeated. Watch for trouble signs: possible substance abuse, change in lifestyle, living beyond means, possessiveness of work, or not taking vacations.

This limited list of internal controls can help reveal financial discrepancies and protect your company’s assets as well as recognize the excellent efforts of your staff.