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Internal control in this company can refer to both administrative and accounting control.
1. Administrative control comprises the plan of organization and all methods and procedures that facilitate management planning and control. Examples are departmental budgeting procedures and reports on performance.
2. Accounting control comprises the methods and procedures that are mainly concerned with the authorization of transactions, the safeguarding of assets, and the accuracy of the financial records. Good accounting controls help maximize efficiency; they help minimize waste, unintentional errors, and fraud.
There are five key elements of internal control: environmental control, risk assessment, control procedures, monitoring and information and communication. Each area contributes an essential part of the control system in accounting information system as a whole, and without all of the key elements present, the controls and control system doesn’t work.
Environmental Control
The environmental control refers to management and employee attitude and behavior.
The goals and objectives of management will affect employee behavior and attitude throughout a business. For example, the goal and objective of the management is to achieve certain sales levels at all costs, this will discourages employees to adhere to the internal controls in place and encourages achievement of what management wants, never mind the consequence. So, to ensure employees adhere to internal control, the goals and objectives of management must communicate well and clearly to them. As a result, human resources department will then provide much of the input for effective environmental control.
Risk assessment
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