Corporate Compliance Report
Internal control means different things to different people. This causes confusion among businesspeople, legislators, regulators and others. Resulting miscommunication and different expectations cause problems within an enterprise. Problems are compounded when the term, if not clearly defined, is written into law, regulation or rule. (COSO, 2006) Internal control over financial reporting has always been a major area in the governance of an organization, and this importance has been magnified in recent years. This tool is intended to give audit committees basic information about internal control to understand what it is, what it is not, how it can be used most effectively in the organization, and the requirements of management with respect to the system of internal control over financial reporting. (AICPA, 2006)
UTC delivers a premium internal audit service that enables its business segments to achieve superior performance. UTC seeks effective risk management, identify opportunities for enhanced efficiencies, foster compliance and facilitate constructive change. The aim of corporate governance at UTC is an ethical culture in which 100 % compliance with laws and regulations is the standard. UTC's internal audit teams conduct risk-based audits and recommend strategic solutions to the UTC business units. These controls are designed to provide reasonable assurance that the Corporation’s assets are safeguarded, that transactions are executed in accordance with management’s authorizations and that the financial records are reliable for the purpose of preparing financial statements. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations (COSO) of the Tread way Commission in Internal Control — Integrated Framework. Management concluded that based on its assessment, UTC’s internal control over financial reporting was effective as of December 31, 2006. (2006, UTC)
Internal control consists of five interrelated components. These are derived from the way management runs a business and are integrated with the management process. The components are:
• Control Environment -The control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure. (COSO, 2006)
• Risk Assessment - Risk assessment is the identification and analysis of relevant risks to achievement of the objectives, forming a basis for determining how the risks should be managed. (COSO, 2006)
• Control Activities - Control activities are the policies and procedures that help ensure management directives are carried out. They help ensure that necessary actions are taken to address risks to achievement of the entity's objectives.
Internal controls is defined as a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance
According to PCAOB Auditing Standard 5 paragraph 2, “effective internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. If one or more material weaknesses exist, the company 's internal control over financial reporting cannot be considered
So when at work or at a party you have to ultimately make a choice. At work, you can choose to do poorly because you think your work will be overlooked resulting in an external locus of control or work hard because you think you determine the results of your work, which is an internal locus of control. Same situation different scenario, with your personal life. For example, you can choose to be quiet and talk to no one at a party because they choose to be alone. They make a difference by sparking up a conversation with someone they know or someone
What is internal control? According to University of Phoenix, Axia College Internal Control and Cash (2009), internal control is all of the related methods and measures adopted within an organization to safeguard its assets and enhance the accuracy and reliability of its accounting records. The primary reasons for internal control are help companies protect their investments and merchandise against theft from everyone, including employees and to make sure that the accounting is done correctly and truthfully.
Krishan, G.V., & Wei, Y. (2012). Do small firms benefit from auditor attestation of internal control effectiveness? Auditing, 31(4), 115-137. doi:10.2308/ajpt-50238
Risk assessment.
The report on internal controls, according to ExxonMobil’s CEO, Treasurer and Controller, states they are solely “responsible for establishing and maintaining adequate internal control over (ExxonMobil’s) financial reporting.” They evaluated the effectiveness of internal controls over financial reporting based on COSO’s framework and concluded that controls were effective (MD&A, F-22). The report in internal controls acknowledged us—ExxonMobil’s independent public accounting firm PricewaterhouseCoopers LLP (PwC)—stating that the Corporation maintained effective internal control over financial reporting for 2009 and 2010 as it is the responsibility of management to maintain and assess its effectiveness. We, PwC, are responsible only to express an opinion on internal controls, which we opined in 2009 as unqualified (MD&A, F-22).
The history behind UTC's compliance program can be broken down into five major key areas that helped solidify its foundation as a premiere ethic company including antitrust, corruption, government contracts, data privacy and international trade compliance. Through analyzing and constantly upgrading its compliance risks, risk plans and track implementation. Antitrust is first of the five key areas. Antitrust is the preventing or controlling trusts or other monopolies, with the intention of promoting competition in business. UTC has compiled antitrust compliance programs that help promote and protect against competition. Corruption is fraudulent conduct by those in power, usually including bribery. This action has a zero-tolerance policy with
There are various reasons why risk assessments are put in place. Risk assessments can be used to assess the environments that we work in, the risks staff may be exposed to, the risks to the individual and the risks of the equipment that is in place. Once the risk assessment process has been completed it will help all concerned to thin about ant potential hazards there may be in the situation or activity and the ways risks to the individual others cane be minimized. Taking risks is part of being able to choose and be in control of your life. It is important that concerns about risks do not get in the way of people living their lives in the way they want to. We must ensure we make the individual aware of all risks for them to be able to make their
Risk is the possibility of injuries or accidents occurring in your settings. Every individual health and social care settings has its own hazards which poses a potential risk. Risk assessment must be use to evaluate and minimise the risk if they are inseparable from the person centred care of the user. The risk factors in the care setting could have psychological, social, financial and physical instabilities.
Control mechanisms are necessary in order for any business to run smoothly and ensure that things are going as planned. These controls help the business determine the activity and direction of its employees in a manner that helps the company meet its goals (Bateman & Snell, 2007). There are three basic types of controls: bureaucratic, market, and clan. Bureaucratic control basically consists of the formal rules and regulations that establish authority, set standards, and regulate behaviors (Bateman & Snell). Market control regulates activities by examining the competition, analyzing profit and loss, and utilizing economic information (Bateman & Snell). Clan control differs from the previous two controls in that there are no formal rules, regulations, or analysis. Clan control functions under the assumption of common goals, values, and trust among individuals and the organization (Bateman & Snell).
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
Controlling is the fourth management function and its purpose is straightforward- to make sure that actual performance meets or surpasses objectives. It is well used for decision making and problem solving. Effective control depends on other management functions and it gives feedback to them. These functions are planning, organizing and leading. Planning sets directions and allocates resources. Organizing puts people and material resources together in working combinations. Leading motivates people to use these resources in the best way. Basically, the function of controlling is to make sure that the right things happen in a right time and in the right way.Control helps that overall directions of individuals and groups are consistent with short-range and long-range organizational plans. Also, it helps to ensure that objectives and accomplishments are coherent with one another throughout an organization. Moreover, it helps maintaining fulfillment with essential organizational rules and policies. Good example where we can see role of control is in helping to protect individual rights to become equivalent with employment opportunities at work. The control process practiced by managers includes four steps: 1) establish objectives and standards 2) measure actual performance 3) compare results with objectives and standards and 4) take actions if necessary1. The controlling process starts with establishing performance objectives and standards which means that the controlling process begins with planning. Performance objectives should be defined and associated with specific measurement standards for determining how well they are accomplished. Standards are the targets of performance. The next step of the control process would be measur...
The Feedback after applied and executed is the most important of the process of control, Outcome controls are judge by the result of the organization’s activity. The behavior control involves manufacturing to know how the members are doing and behave in a daily base. The financial control in the process execute by monitoring costs and expenditure. The financial control can monitor intangiveis like customer satisfaction and employee morale.
The importance of internal audit has certainly raised up along with the transforming business environment. Nowadays internal audit standards and theories have been actively discussed, yet there are still many debates on the ambiguity of internal audit professions’ foothold and their duties. Moreover, the internal audit scandals have never been out of sight: FIFA (2015), Toshiba (2015), Libor (2012), Olympus (2012). Practitioners and scholars study the audit methods, the effectiveness, the factors, etc. that impact the internal audit, but it is only useful once the outputs of internal auditors are realised to outcome.