Question

Summarize the internal control: Maintaining adequate records and give an example of how you would use it in your company to protect assets or enhance the accuracy of accounting records.

Answer 1

Internal Control , as defined in accounting and auditing , is a process of assuring achievement of an organisation's objective in operational effectiveness and efficiency , reliable financial reporting and compliance with law , regulation and policies.

There are broadly two category of Internal Control : Preventive or Detective .

Preventive Internal Control as he name suggest are policies that do not allow centain events to occur.

Whereas, the Detective internal control are the backup that ensure that the preventive internal control are operating as intended.

the main objective of Internal Control are -

Efficiency- Efficient and effective internal control system ensurs that all task are completed according to the standard and all organisational goals are met.

Safety and Security - Safety plays a large part in any system of internal controls. Rules and procedures play a vital role in maintaining a safe atmosphere for your employees and customers.

Security is very important to organizations such as banks that keep valuable assets in employee work areas. Physical controls such as locks and logged keycard access points are highly effective in this area. Policies such as requiring anyone entering a bank vault or handling money to be directly supervised can also play a part in controlling security.

Propriety and Reliability - An important objective of internal controls is to ensure that all monetary transactions conducted by the organization are in line with the company’s operational activities. Controls in this area are focused around accounts payable and accounts receivable, ensuring that money is not being lost, stolen or posted to erroneous accounts. Division of a cash payment and receipt-related tasks among several employees is a good way to control these errors, as is the use of internal auditing software.

Considerations- There are many strategies available for creating and implementing an effective system of internal controls. Consider your specific objectives when deciding which types of internal control methods are the most effective and cost efficient for your organization.

how I would use internal control to protect asset and enhance accuracy-

1. Risk assessment – This is important to enhance accuracy. Whether formal or informal, a risk assessment is critical to the process of identifying areas in which errors, misstatements or potential fraud is most likely to occur. By conducting a thorough risk assessment, I can identify which control activities to implement.
2. Control environment – When leaders demonstrate a good ethical and moral framework, appear to be approachable about all issues and a commitment to excellence, nearly everybody takes notice and adjusts their behavior accordingly. It also helps to develop a rapport with your management team to encourage engagement throughout all levels of leadership.
3. Information and communication – Providing your employees with information about the internal control process and the resources available to them is a critical component to your success and the overall success of the internal control activities. In fact, simply knowing there are certain controls in place to promote accuracy and prevent fraud is enough to stop problems before they even start.
4. Monitoring activities – For your internal controls to work (and work well) you must establish your monitoring activities – and monitor frequently. Establishing internal controls is great, but they will have no effect if you neglect to monitor them. Furthermore, your internal controls should grow with your business or organization to ensure their long-term effectiveness.
5. Safeguard assets from employee theft, robbery, and unauthorized use