Strengths and Weaknesses of Sunshine's Current Internal Control System
What were the strengths and weaknesses of Sunshine’s current internal control system?
“Internal control is broadly defined as a process designed to provide reasonable assurance regarding the achievement of effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations”(COSO.org, 2012). Internal control can help an entity achieve its performance and profitability targets, and prevent loss of resources.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) developed the internal control integrated framework. COSO internal control framework consists of five components, control environment, risk assessment, control activity, information and communication and monitoring.
Sunshine’s internal control has been assessed in the chart below:
Control environment is the foundation for all other components. The control environment factors include the integrity, ethical values and competence of the entity’s people. Risk assessment is the identification and analysis of relevant risks tied to future objectives. Control activities are the policies and procedures that ensure management directives are carried out. Information and communication allows us to see if a company’s current system is providing the appropriate reports that meet the needs of a company. Last but not least monitoring, how often is the management team evaluating their controls?
What could Li propose to the management to improve the situation?
It is evident that Sunshine lacks internal controls. The management team needs to get together and implement solid internal controls. Li can propose that a new inventory system be implemented to prevent manual keying. There needs to be intensive communication between all levels of Sunshine, so monthly meeting should be taken into consideration where headquarters, regional offices and branch offices get to voice their opinions and provide updates within their
“Internal control is broadly defined as a process designed to provide reasonable assurance regarding the achievement of effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations”(COSO.org, 2012). Internal control can help an entity achieve its performance and profitability targets, and prevent loss of resources.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) developed the internal control integrated framework. COSO internal control framework consists of five components, control environment, risk assessment, control activity, information and communication and monitoring.
Sunshine’s internal control has been assessed in the chart below:
Control environment is the foundation for all other components. The control environment factors include the integrity, ethical values and competence of the entity’s people. Risk assessment is the identification and analysis of relevant risks tied to future objectives. Control activities are the policies and procedures that ensure management directives are carried out. Information and communication allows us to see if a company’s current system is providing the appropriate reports that meet the needs of a company. Last but not least monitoring, how often is the management team evaluating their controls?
What could Li propose to the management to improve the situation?
It is evident that Sunshine lacks internal controls. The management team needs to get together and implement solid internal controls. Li can propose that a new inventory system be implemented to prevent manual keying. There needs to be intensive communication between all levels of Sunshine, so monthly meeting should be taken into consideration where headquarters, regional offices and branch offices get to voice their opinions and provide updates within their