Detecting Red Flags is important as the internal controls mechanism should define a specific approach for...

Detecting Red Flags is important as the internal controls mechanism should define a specific approach for monitoring financial statements (and the base transactions below the consolidated statements) on an ongoing basis. In this discussion forum, please address the following situation: You are the controller of a global business unit of a major corporation. This business unit is comprised of 15 manufacturing plants globally, which roll up into consolidated business unit financials of which you are responsible. As a result, you are tasked with monitoring the financial results of the entire business unit, which entails ensuring that there are no fraudulent activities rolling up through your financial statements. How would you design your monitoring system to handle this responsibility? What specific steps would you put in place to manage the global financial statements? If you did notice potentially questionable activity in one of your plants, how would you react? What would you do to investigate and address the issue?

Expert Solution

It is a challenging task to head and control consolidated financial statement of such global firm and there should be proper check and balance in each level and plant to judge the veracity of the numbers posted by the concerned financial comptroller. I will put responsibility center in each plant and on each major level. The head of each responsibility center will report to me. I will also create a proper financial model and budget document so that I can compare the actual with the budgeted and ask for the reason of varianvce if any to the concerned financial head. Financial planning and analysis division will oversee the function of all plant with coordination from each individual plants.Through this model I can fix responsibility of each plant. After putting all these measures, if I will notice any mishappening then I will conduct a proper forensic study first internally and then through a trusted external agency to know the loopholes. If any one will found doing something wrong then a swift action will be taken by considering all the circumstances.

keosha answered 1 year ago

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