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Accounting and financial management

   

Added on  2021-04-19

12 Pages3649 Words478 Views
Test PrepPolitical Science
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Running head: ACCOUNTING AND FINANCIAL MANAGEMENTAccounting and financial management University NameStudent NameAuthors’ Note
Accounting and financial management_1

2ACCOUNTING AND FINANCIAL MANAGEMENTTable of ContentsIntroduction:..................................................................................................................3Discussion:...................................................................................................................3Definition of internal control system:............................................................................3Responsibility of management concerning internal control system:............................4Identified Weakness in the internal control system of OLC Plc:..................................6Impact of such weakness on financial records of OLC Plc:.........................................7Conclusion:.................................................................................................................10References list:...........................................................................................................12
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3ACCOUNTING AND FINANCIAL MANAGEMENTIntroduction:The report is prepared to define the concepts of internal control system oforganization and the extent of responsibility of management in handling suchsystem. Importance of external auditor in the internal control system has also beendemonstrated in the report. Report is prepared by referring to the case study on OLZplc that is a manufacturing company. The weakness of internal control system ofcompany and its possible impact on the financial records of company has also beenexplained in the report. Weakness of internal control system of company is explainedin terms of likely impact on accounting figures and financial records. Later part ofreport discusses the recommendations for improving the purchase systemprocedures and control environment. Discussion:Definition of internal control system:Internal control system is the systematic measurement and procedures that iseffected by management, directors and other personnel of organization for providingreasonable assurance of the objectives of organization in relation to financialreporting and operational effectiveness and efficiency. It can be said that it is asystem that helps in providing reasonable assurance about three categories ofobjectives of organization namely operations effectiveness, financial reporting liabilityand compliance with applicable regulations and laws. Internal control systems oforganization are preventive, corrective and detective. Preventive internal controlsystems are designed for keeping irregularities and efforts form occurrence in thefirst place (Alzeban and Sawan 2015). Corrective internal control systems aredesigned for correcting detected irregularities. On other hand, detective internalcontrol system helps in detecting irregularities that might have occurred. Theobjectives of internal control are desired conditions and gaols that minimizing thepotential of unauthorized, waste, loss and occurrence of misappropriation. In order toform an effective control system, they must be in compliance and must beobservable and measurable. The control objectives involve completeness,authorization, physical safeguard, accuracy, segregation of duties and handling oferrors (Newton et al. 2015).
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4ACCOUNTING AND FINANCIAL MANAGEMENTResponsibility of management concerning internal control system:Management of organizations has the responsibility of maintaining theadequate internal control system by properly communicating the duties andexpectations of staffs of control environment. The management can address some ofthe major areas of framework of internal control system. Moreover, they areresponsible for system development to control and monitor risks. Managementmonitors the independent assurance functions. Operations, compliance andobjectives of financial reporting are the responsibility of management and thereforeproviding reasonable assurance is internal control system adequacy (Boyle et al.2015). Identification of risks along with maintaining, establishing and monitoring thesystem of internal control forms the management responsibility. Furthermore, thestrategic direction of the obligations and agency in relation to the accountability suchas implementation, operation and design of internal control system is an importantarea of concern of management. They need to be attentive and aware of riskmanagement and other issues relating to internal control and documenting any riskand key areas. The given case study on OLC Plc depicts that the purchase order isgenerated by the employment of computer system that are automaticallyprogrammed for indication whenever there are minimum levels of inventory. Themanagement of organization is responsible for pre determining the level ofinventories. Purchasing director is involved in reviewing the purchasing order alongwith accounting for products previous price. Moreover, updating of inventory recordsystem is done by computer input documents that are filed in the office of purchasingdirector. It can be seen from the analysis of case study that the filing of inputdocument goes through proper documenting procedures that involves manager aswell as accountants and clerks (Domingues et al. 2015). Some other officers that areinvolved in filing the documentation of invoice slips are office junior clerk andaccountants clerks. Moreover, there is a proper procedures of all the transactionsrelated to purchase. Therefore, it can be said that the internal control system of OLCPlc involves decision of management such as purchasing director at several levels.However, there exist some loopholes in the system of internal control relating topurchase order. It can be seen from the case study that the purchase order invoice isapproved by office junior files until the end of week. It can be said that there exist
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