LEARN MORE...

Home
Documents
May 2021
30
Understanding auditing and internal controls week 3 fin590

Understanding auditing and internal controls week 3 fin590

Content type

User Generated

Uploaded By

rqjva_001

Pages

Showing Page:

1/5

Understanding Auditing and Internal Controls

University of Phoenix

FIN590

December 7, 2020

Showing Page:

2/5

UNDERSTANDING AUDITING AND INTERNAL CONTROLS 4

How do you design internal controls to reduce risk, potential failure points that can

put control at risk, and examples?

Every organization has an internal control to minimize the risk and prevent the

occurrence of fraud or irregularities. The system comprises of control environment, risk

assessment, control activities, information and communication, and monitoring activities

(Schandl & Foster, 2020). Some of the factors that should be considered during the designing

process are the objectives of the unit, goals of the organization, and associated risks and

materiality. Control can be put at risk due to poor communication and supervision by the

management team and inappropriate training of the team (Schandl & Foster, 2020). This could

result in poor implementation and inconsistent operation of the proposed internal control system.

Controls may stop if an employee does not have a clue of internal control procedures despite

having good intentions, hence disregarding its importance (Schandl & Foster, 2020). For

example, an appropriate review and scrutiny may not be followed before issuing paychecks in

order to meet the deadline.

Examples of different material weaknesses and significant deficiencies; compare

and contrast these two types.

A material weaknessis described as an internal control deficiency in reporting, for

example, the likelihood of misstatement of interim or statements of financial position of a

company (Frankenfield, 2019). The irregularity/fraud may not be detected in time or may not be

prevented. An example of a material weakness is the restatement of financial statements that

were formerly issued to reveal correction of a material statement (Frankenfield, 2019). On the

other hand, significant deficiency refers to a combination of deficiencies in internal control over

financial reporting that is less severe as compared to material weakness (Aobdia, et al., 2018).

Showing Page:

3/5

End of Preview - Want to read all 5 pages?

Access Now

Unformatted Attachment Preview

1 Understanding Auditing and Internal Controls University of Phoenix FIN590 December 7, 2020 UNDERSTANDING AUDITING AND INTERNAL CONTROLS 4 How do you design internal controls to reduce risk, potential failure points that can put control at risk, and examples? Every organization has an internal control to minimize the risk and prevent the occurrence of fraud or irregularities. The system comprises of control environment, risk assessment, control activities, information and communication, and monitoring activities (Schandl & Foster, 2020). Some of the factors that should be considered during the designing process are the objectives of the unit, goals of the organization, and associated risks and materiality. Control can be put at risk due to poor communication and supervision by the management team and inappropriate training of the team (Schandl & Foster, 2020). This could result in poor implementation and inconsistent operation of the proposed internal control system. Controls may stop if an employee does not have a clue of internal control procedures despite having good intentions, hence disregarding its importance (Schandl & Foster, 2020). For example, an appropriate review and scrutiny may not be followed before issuing paychecks in order to meet the deadline. Examples of different material weaknesses and significant deficiencies; compare and contrast these two types. A material weaknessis described as an internal control deficiency in reporting, for example, the like ...
Purchase document to see full attachment