Question

Control activities fall into five categories with specific control activities in each category.  

Explain which specific control activity you feel is the most critical in preventing fraudulent activities.  

Additionally, if you could eliminate a specific control activity due to financial constraints in maintaining controls, explain which one you would eliminate.

Answer 1

Control activities are strategies to help ensure a required task.Even if in the system, it is taken to pay attention to the risk of malfunction.

Control activities : 1. Performance review: The company feels the need for separate inspections because internal controls change from time to time without having a frequent review mechanism. Employees may sometimes forget or even knowingly fail to follow the procedure. Therefore, in such a manner, the work of the employee should be established independently by another member of the staff.

2. Physical controls: The use of physical precautions to protect assets and records in the company is also the biggest advice. For example, only authorized employees of the company should be allowed access to accounting programs and data files.

3. Division of Duties: The division of duty is, in general, the possession of property or authorization of a transaction and the keeping of company records. Responsibility must be exercised. To prevent burglary, the property, transaction authority should be separated from the relevant cell. Records of operational responsibility should be separated. IT duties should be separated from the user's sections to ensure that the information is reliable. 

4. Authorization: a) General authorization: It establishes a management policy and asks subordinates to follow all the general guidelines of the board. b) Specific authorization: In this, the company establishes management policies and subordinates are advised to apply certain types of guidelines on a case-by-case basis.

5. Information processing: Effectively and user-friendly documentation should be prepared in IT or manual system and presentation should be made to all users to ensure that all assets and transactions of the company are properly accounted for.