Question

Inaccurate and unreliable information can spell financial disaster for businesses and persons who use this information for decision-making purposes. From the standpoint of a business, accurate and reliable information is necessary in order for a potential investor to have when they are considering investing with the company. If the information is not accurate and reliable, this will potentially harm the investor. Inaccurate financial information may be due to the incompetence of the accountant who prepared the financial statements or due to dishonesty and an attempt to conceal information.

Internal control is the system of policies and procedures that a company puts in place to provide reasonable assurances that:

The company’s operations are effective and efficient

The company’s financial reporting is reliable, and

The company is complying with applicable laws and regulations

1. In your first post, respond to the following questions:

a. How can a business ensure that the employee who is preparing the financial statements is capable of doing so accurately?

b. What internal controls might you recommend to the company to be sure that an attempt to conceal information has not occurred?

c. On a personal note, how do you minimize risk for errors in your work? This may include your schoolwork or the work that you do for your employer.

Answer 1

1.a) A person's skills and qualifications ensure that he is able to perform his job in the best possible manner. While hiring an accountant the management should ensure that he is technically competent. Once hired, a periodic review of his work should be done to ensure that he is performing his duties satisfactorily.

b. To ensure that information has not been concealed:

-The maker-checker concept has to be applied. The work done by one employee should be checked by another.

-Segregation of responsibilities should be done. For example, the person responsible for payroll accounting should not be responsible for salary processing.

c. On a personal note, while working for my company, I minimize the risk of errors by maintaining a checklist in an excel file for each responsibility. This helps me to remember all the actions which need to be undertaken regarding a particular job and the chances of error are minimized.