Internal Controls and Risk Evaluation
Kudler Food’s internal control is designed to provide reasonable assurance in regards to the reliability of Kudler Food’s financial reporting. With proper internal controls Kudler Food’s strives for effectiveness and efficiency of all the company’s operations along with compliance with the laws and regulations that are applicable in the State of California. Kudler Food’s internal control consists of five components. The first component is the control environment that is set by Kudler’s Foods. This is where the tone of the company is set and is the foundation that makes up all other components of internal control that also provides the discipline and structure of identify of relevant risks for achievement of the goals set by the company and forming a basis for determining how the risks should be managed. The second component is risk. The risk events can be uncertain, deciding whether to accept a risk or avoid a risk related activity that can have significant consequences to the company. Kudler’s decision in choosing to reduce risk implies that Kudler is committed to implement the necessary internal controls to achieve the effectiveness and efficiency of the Kudler’s operations. The third component in Kudler’s internal control is the control activities. There are two types of controls. One is preventive and the other is detective. Preventive controls are in placed to prevent problems. Detective controls will show that a problem has occurred. These two types of controls are time consuming and can be expensive whereas Kudler should ensure that the benefits outweigh the cost. The fourth component is the information of the identification, capture, and exchange of information in a form and time frame that enables Kudler employees to carry out their responsibilities set forth to achieve the goals of the companies throughout the internal control process. Internal controls are considered means to an end. They...
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