Running head: INTERAL CONTROL AND RISK EVALUATION
Internal Control and Risk Evaluation
April 7, 2014
In today’s society, internal controls are applied to support an organization's managers to become more successfully to release the responsibilities by applying and understanding internal control concepts. Internal controls are most frequently saw as "a lot of red tape"; however, internal controls have different circumstances when confirming high moral and ethical values which should be communicated in an organization. Internal controls are essentially composed of five interrelated components which are communication and information, monitoring, control environment, risk assessment, and control activities. The four areas of concerns are accounts receivable, payroll, accounts payable, and inventory. The identification of risks in the system, how the risk would be merged into the flowcharts, the internal controls that must be used, and an evaluation of the internal control system, and outside controls must be used. The biggest vulnerability area is accounts receivable because of an auditing and accounting perspective this is where the point money is received into the organization. In the flowchart, account receivable is recognizable as the point where payments will be posted. Account receivable has a secondary risk area in which the late charges, interest and other fees are added. The area of payroll is where the main risk concern will always be an individual superseding payroll internal controls. An additional internal control that can be applied by use of flowchart designs will be for authorized individuals having access to the authentic payroll processing function that provide access for authorizations of direct deposit/ or the printing of the payroll checks. Authorization is the main internal control area with accounts payable. The nonexistence of authorization is the major...
References: Beard, D. and Wen, H.J. (2007). Reducing the Threat Levels for Accounting Information Systems. Challenges for Management, Accountants, Auditors, and Academicians. Retrieved August 12, 2009 from: http://www.nysscpa.org/cpajournal/2007/507/essentials/p34.htm
University of Pennsylvania, (2009). Internal Controls Self-Assessment: A Guide to Internal Controls. Retrieved August 13, 2009 from: http://www.sru.edu/pages/1511.asp
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