Question

Compare the existing internal control environment at Microsoft to management’s responsibility for designing effective internal controls outlined in the textbook, and identify the deficiencies that existed. Speculate on what types of internal controls could have been designed to detect the accounting irregularities, and provide at least two reasons why the internal controls that were in place at Microsoft were not effective in detecting the accounting errors. Provide specific examples. Discuss the importance of senior management in setting the tone at the top for honesty and integrity within a company. Identify at least two consequences of management not establishing a code of ethics, and describe the impact on the internal control environment. Provide examples.

Answer 1

The deficiencies that existed in Microsoft were identified with disappointment of the organization to isolate the obligations of the best administration particularly during the time spent archiving all exchanges.
The best administration of Microsoft impacted the announcing practices of the organization to such an extent that what was being accounted for was at the watchfulness of the senior administration and in the occasion that review division understood the distorting in their survey of the monetary data, the Chief reviewer is compromised and furthermore given poor execution audits for attempting to uncover what the senior administration were doing to the organization financials.

Microsoft should isolate the obligations and revealing connections of its inner review the executives to such an extent that the boss interior reviewer should answer to the organization top managerial staff such he/she might most likely uncover all the wrong bookkeeping rehearses without dread of response from the senior administration.
This will guarantee that the organization the board keep up their demonstrable skill and respectability in the announcing and arrangement of the organization fiscal summaries.

The internal controls at Microsoft were not viable in recognizing bookkeeping blunders on the grounds that the compromise strategy that was intended to guarantee exactness and trustworthiness of the inner budgetary data did not cover the corporate hold accounts in this manner empowering the administration to make unseemly changes in accordance with the save accounts without acclimating the GAAP rules.

Another reason is that the boss interior auditor of Microsoft was answering to the senior administration of the organization rather than the directorate hence the main inspector needed freedom in execution of his jobs as he was helpless to the board impact and control.

At the point when the best administration set the tone at the best for genuineness and uprightness inside the organization, the representatives likewise will probably maintain similar qualities and pursue the case of their authoritative pioneers and have a pledge to trustworthiness, moral quality and exercise of respectability.
If the administration neglect to set up a code of morals in the organization it could prompt results, for example, execution of extortion in the association as the workers will need tenets and controls that manage them to keep up trustworthiness and furthermore being moral in the entirety of their hierarchical dealings.
It could likewise prompt workers having irreconcilable circumstance with the organization and furthermore execute insider exchanging for their advantage and furthermore make representatives abuse the organization resources that might be available to them.
One method for maintaining honesty incorporate compensating workers for extraordinary moral conduct. Additionally, a worker may utilize insider data to move or buy partakes in the organization.