Role of Internal Controls
Based on what you have learned about internal controls, provide recommendaons on what controls the business owner should put in place to prevent loss of inventory and ensure that any losses are reported immediately. Also, specify which parts of the financial statements are affected by these losses. Specifically, you must address the following rubric criteria: Role of Internal Controls Explain the role of internal controls in business sengs. Also explain how not having internal controls in place may impact the accurate analysis of any wrongdoing. Recommendaons Recommend at least two internal controls that should be put in place to prevent inventory from going “missing,” nong any assumpons you are making about the root cause of the missing products and how your recommendaons will help address them. Recommend at least one control that should be put in place to alert the owner if something is actually missing. Financial Statements If you found that two $400 HD televisions were missing, explain which financial statements you would correct and how. Be specific as to accounts and amounts. Guidelines for Submission Submit a 1- to 2-page Word document with 12-point Times New Roman font, double spacing, and one-inch margins. Sources should be cited according to APA style.
Internal Controls
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Internal Controls
Role of Internal Controls
Internal controls are measures put in place within an organization to minimize errors, reduce risks, and streamline employee behavior (Hightower, 2009). Depending with an organization, internal controls tend to differ. For instance, in a University, internal controls would be put in place to help the institution achieve its academic objectives. However, in business, internal controls are aimed at reducing losses and increasing profits. Internal controls are important in a business setting. They represent the moral responsibility to comply with business procedures and policies (Hightower, 2009). The main purpose of internal controls is to safeguard a business. Besides this, internal controls help to further an organization’s objectives. In business, internal controls minimize risk, promote efficiency, protect assets, and encourage adherence to rules and policies (Hightower, 2009).
Without internal controls, it is hard to prevent fraud (Hightower, 2009). For instance, if employees were not required to submit receipts to receive reimbursement for expenses incurred, then they would likely inflate the expenses leading to fraud. However, through controls such as per diem, an organization’s accounts department can monitor internal spending. The absence of internal controls also creates room for errors (Hightower, 2009). One of the functions of internal controls is spotting potential errors. For instance, before distributing checks, accounts personnel are required to review each payroll. Failure to do this often leads to the disbursement of wrong checks. Lack of internal controls also leads to lawsuits. Without well laid-out organizational policies and procedures, it becomes hard to streamline employee behavior (Hightower, 2009). However, by worki...