In: Accounting
1. support or critique the idea that the Committee of Sponsoring Organization of the Treadway Commission (COSO) transition would strengthen internal controls over financial reporting in publicly traded companies.
2. determine the fundamental control deficiencies associated with the credit function. Next, propose at least one (1) control improvement that the credit department management could make in the process.
Answer(1): Yes, Committee of Sponsoring Organization of the Treadway Commission (COSO) transition would strengthen internal controls over financial reporting in publicly traded companies. COSO has made a five components model to enhance the internal control of the companies. This model ensures the evaluation of internal control. This model is adopted as the generally accepted framework for internal control.
This model has been adopted as the generally accepted framework for internal control and is widely recognized as the definitive standard against which organizations measure the effectiveness of their systems of internal control.
Five components are as following:
These components ensure the sound and effective internal control in the public companies. The whole system of internal control is analyzed and monitored and if any problem arises, it is solved timely. This system will give the employees and management whole insight about the need of effective internal control over financial reporting.
Answer(2):
Fundamental control deficiencies associated with the credit function: The primary deficiency associated with credit function is that, "There are problems with the segregation of duties". Segregation of duties is the important parameter of preventing fraud.
Control improvement- Credit manager can divided the task and delegate it to others to ensure the effectiveness of the task. He should be allowed to approve or deny any credit at his own.