Major Internal Control

Major Internal Control

Length: 1240 words (3.5 double-spaced pages)

Rating: Excellent

Open Document

Essay Preview

More ↓
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
Risk assessment incorporates a businesses ability to analyze business risks, estimate their importance and react or act accordingly. Risk assessment is generally a managerial function, but can be included in a day to day analysis by employees, if the work environment includes risks and dangers.
Control Procedures
The next element, the control procedures simply provides the stated methods for carrying out the environmental controls, the risk assessment, the monitoring, and the information communication that must take place in the internal control process. In order to decrease the potential for fraud, inadequately trained personnel, and eliminate process error, control procedures benefit the company, the management, and the employee of a business. Control procedures greatly affect the information and communication aspect of the business, in that so much of the communication of the state of the business is dependent upon the information furnished by each department. The checks and balances that the control procedures provide assures a business that each department will provide timely and honest as well as accurate and useful information.

How to Cite this Page

MLA Citation:
"Major Internal Control." 123HelpMe.com. 14 Aug 2018
    <https://www.123helpme.com/view.asp?id=166031>.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Essay on Internal Cash Control

- Internal cash control is very important to any business. Without effective methods in place to ensure that funds and resources are being used in an ethical and efficient way, a company may lose money or run into many other problems. Through proper establishment of responsibly, segregation of duties, document procedures, and security measures, any company should be able to maintain their funds and feel confident that their employees are producing accurate and ethical results. In the exercise detailing the cash disbursement within Idaho Company one could find some major weaknesses....   [tags: Business Management Strategy Cash Control]

Free Essays
1013 words (2.9 pages)

Internal Struggles in The Yellow Wallpaper by Charlotte Perkins Gilman

- “The Yellow Wallpaper” tells the story of a woman who is trapped in a room covered in yellow wallpaper. The story is one that is perplexing in that the narrator is arguably both the protagonist as well as the antagonist. In the story, the woman, who is the main character, struggles with herself indirectly which results in her descent into madness. The main conflicts transpires between the narrator and her husband John who uses his power as a highly recognize male physician to control his wife by placing limitations on her, forcing her to behave as a sick woman....   [tags: maddness, control, oppression]

Research Papers
772 words (2.2 pages)

Benefits of Internal Controls Essay

- ... The announcement of deficiencies causes a lack of faith in the operations of the company which could cause the company’s stock to drop immediately, while investors begin to establish the extent of the damage. There are some possible limitations in the efficiency of internal controls. Some specific limitations can consist of human factors or system omissions (Financial Accountability Handbook, 2013). Some examples may include carelessness, poor judgment by staff members, or even a lack of knowledge....   [tags: safeguards, finances, responsibilities]

Research Papers
760 words (2.2 pages)

Taste Buds Outside The Mouth and Male Birth Control Essay

- Recently, there have been advances in scientific research that has led to the discovery of taste receptors that are outside of the mouth. These taste receptors are scattered throughout the entire body, with large concentrations on the testicles and anus. Sweet and Umami taste receptors are present in this area and can present a minor taste sensation (though nowhere near as well as our mouths can). Through a simple lab test on rats, scientists were able to disable the taste receptors to see if it would have any major impact on them....   [tags: Scientific Research, Male Birth Control Pills]

Research Papers
857 words (2.4 pages)

Executive Summary: The City of Atlantla, Georgia Essay

- Executive Summary Atlanta, the most populous city and capital of the state of Georgia is also known for being the ninth largest metropolitan area in the country. The City has faced some extreme economic challenges over the past several years, but it is now successfully entering its comeback stages. The City’s restoration is due in part to its conservative budgeting practices and procedures and its commitment to restore the financial sanctity back to the City. Thanks to the vision and leadership of the current Mayor Kasim Reed, the City has been able to pass resourceful, balanced budgets and establish a sizeable cash reserve that has helped to create a manageable debt burden with limited fut...   [tags: challenges, budgets, internal control]

Research Papers
3094 words (8.8 pages)

The Internal Business Environment in Zimbabwe Essay

- The Internal Business Environment in Zimbabwe Zimbabwe is one among the low-income economies located within the sub-Saharan part of Africa. Like any other country throughout the world, the state of Zimbabwe has a number of factors that affect its general business environment. These factors range from the internal to external factors of a business environment, and play a major role in the determination of the economic status of the country. It is a given that many countries throughout the word, especially within the African continent fall under the third world category of global classification of nations based on their economic statuses, the levels of advancement in the industrialization sec...   [tags: income, wages, economic growth]

Research Papers
2587 words (7.4 pages)

internal combustion engines of the future Essay

- Internal Combustion Engines for the Future Horst Schulte, Martin Wirth Ford Motor Company ABSTRACT Future internal combustion engines for light duty applications will have to cope with a very complex set of customer, legal and business requirements. Customers are expecting further improvements in durability, reliability, drivability, fuel economy, and cost of ownership. Legal requirements are focused on significant emission and fuel consumption reductions. Additional manufacturing cost reductions will be essential to maintain, or better grow the business in a very competitive environment....   [tags: essays research papers]

Research Papers
3352 words (9.6 pages)

Barclays’ Internal and External Customers Essay

- Barclays’ Internal and External Customers Barclays offers a wide range of services to both internal and external customers. Internal customers are member of staff/colleagues that work in an organisation. Examples of internal customers in Barclays include: Small Business Managers, Customer Relations Team, telephone operators, Financial Planning Managers, Customer Service staff, Counter staff, Accountants, Consumer Relations Team, and Relationship Managers. External customers are the majority of individuals who lives in the local areas....   [tags: Business Management Studies]

Free Essays
2052 words (5.9 pages)

Essay about Alternatives to Conventional Internal Combustion

- Alternatives to Conventional Internal Combustion Congress created the Electric and Hybrid Vehicle Technologies (EHV) Program in 1992 for reasons of national defense. The specific purpose of the program was to solve the issues of performance, stealth, and fuel efficiency demanded by the military. The EHV program was managed by the Department of Defense and the Defense Advanced Research Projects Agency (DARPA), as a side note DARPA developed the F-117 Stealth Fighter during the mid to late 1970’s and early 1980’s....   [tags: Expository Essays Research Papers]

Free Essays
1102 words (3.1 pages)

Essay on The Internal Combustion Engine

- The internal combustion engine has become an integral part of the lives of every person on earth. They’re the devices that have allowed us to cross continents reliably, generate electricity in remote areas and fly around the world in a matter of hours. All these engines do is burn fuel and convert its energy into work. It’s these heat engines that have really changed the world. However the convenience they bring has come at a great cost. The major problem with the internal combustion engine is the environmental damage it has caused....   [tags: essays research papers fc]

Research Papers
855 words (2.4 pages)


1. Reliable personnel with clear responsibilities. The most important element of successful control is personnel. Incompetent or dishonest individuals can undermine a system, no matter how well it meets the other items on the check list. Individuals obviously must be given authority, responsibility and reliability. Yet many employers use low-cost talent that may prove exceedingly expensive in the long run, not only because of fraud but because of poor productivity.
Reliability begins at the top of the organization. The entire system deserves surveillance by operating management to see if it is working as prescribed and if changes are warranted. In addition, appropriate overseeing and appraisal of employees are essential; the most streamlined accounting system is deficient if its prescribed procedures are not being conscientiously followed.
2. Separation of Duties: This element not only helps ensure accurate compilation of data but also limit the chances for fraud that would require the collusion of two or more persons. This extremely important and often neglected element can be subdivided into four parts:
a. Separation of operational responsibility from record-keeping responsibility. The entire accounting function should be divorced from operating departments.
b. Separation of the custody of assets from accounting. This practice reduces temptation and fraud. For example, the book keeper should not handle cash, and the cashier should not have access to ledger accounts such as the individual records of customer.
In a computer system, a person with custody of assets should not have access to programming to any input records. Similarly, an individual who handles programming or input records should not have access to tempting assets.
c. Separation of the authorization of transactions from the custody to related assets. To the extent of feasible, persons who authorize transactions from its origin to its ultimate posting in a ledger. Independent performance of various phases will help ensure control over errors.
d. Separation of duties within the accounting functions: An employee should not be able to record a transaction from its origin to its ultimate posting in a ledger. Independent performance of various phases will help ensure control over errors.
3. Proper Authorization:
General authorization is usually found in writing. If often sets definite limits on what costs to charge, on what price to charge, on what credit limits to grant to customers, and so forth.
Specific authorization usually means that a superior manager must permit authorization. For example, the plant manager, rather than the supervisor, may have to approve overtime. Another example is the need for approval from the board of directors regarding expenditures for capital assets in excess of a specific limit.
4. Adequate Documents: Documents and records vary considerably, from source documents like sales invoice and purchase orders to journals and ledgers. Immediate, complete and temper proof recording is the aim. It is encouraged by having all source documents renumbered and accounted for, by using devices such as cash register and locked compartments in invoice-writing machines, and by designing forms for ease of recording. Immediate recording is especially important for handling cash.
5. Proper Procedures: Most organization have procedure manuals, which specify the flow of documents and provide information and instruction to facilitate adequate record keeping. Routine and automatic checks are major ways of attaining proper procedures. In a phrase, this means doing things "by the numbers". Just as manufacturing activities tend to be made more efficient by the division and specialization of repetitive activities, so can record keeping activities be made less costly and more accurate.
6. Physical Safeguards: Obviously, losses of cash, inventories, and records are minimized by safe, locks, watchmen, and limited access.
7. Bonding, Vacations and Rotation of Duties: Key people may be subject to excessive temptation, top executives, branch managers, and individuals who handle cash or inventories should have understudies, be forced to take vacations, and be bonded. Incidentally, the act of bonding that is buying insurance against embezzlement, is not a substitute for vacations, rotation of duties, and similar precautions. Insurance companies will pay only when a loss is proven, establishing proof is often difficult and costly in itself.
8. Independent Check: All phases of the system should be subjected to periodic review by outsiders (for example, by external auditors) and by internal auditors who do not ordinarily have contact with the operation under review.
9. Cost Benefit Analysis: Investments in more costly systems must be judged in the light of expected benefits. Unfortunately, such benefits are difficult to measure.
Monitoring of Internal Controls
The monitoring of internal controls for effectiveness and necessity is the feedback element of the process. Without adequate monitoring of implemented procedures, how does a business determine the systems effectiveness? They can’t.
No framework for internal control is perfect in the sense that it can prevent some shrewd individuals from "beating the system" either by outright embezzlement or by producing inaccurate records. The task is not totally prevention of fraud, nor is it implementation of operating perfection, rather the task is the designing of a cost-effective tool that will help achieve efficient operations and reduce temptation.
Return to 123HelpMe.com