Usefulness of Internal Controls and Information


Added on  2019-09-26

6 Pages1381 Words353 Views

AUDITING AND ASSURANCE1Question (i). Usefulness of internal controls and information systems in identifying the control risks of thecompany.Internal control plays a major role in a company's success. There are many young accountants haveentered into their careers without knowing the importance of internal controllers. Since many of thesmall-business owners think that having an internal control in their business will be expensive. Sincethe small business needs the internal control but as much as the large business need. Internal auditcontrols the internal risks by analyzing the reports and detecting if It will create any issue in the futureImportance of the internal control system needs to understand for expansion and for controlling therisks of the company but to study the importance firstly, there is a need to choose the extent of aninternal control system which is correct for the business. We need to analyze the control environment,the assessment of risk, information and the communication, monitoring and controlling the activities.Internal control can be described as the regarding the assertion of financial statement and the secondone is the controlling activity itself by nature.The internal controllers almost use to cope with the difficult problems even before occurring. Thegood internal control risk by identifying the issues as mentioned below:They are responsible for the disclosure of the accounts transactions whether they are disclosedproperly at the end of the financial year or even keep the check at every month on the financialstatements.They check the control on the transactions, i.e., only the authorized and valid transactionsshould be processed.They should make sure that are liabilities should be very less than the assets of theorganization or assets are the rights of an organization and liabilities are the obligations of it asper the date mentioned they should be received.The transactions should be completely processed

AUDITING AND ASSURANCE2Transactions should be valued accurately by using the specified rules mentioned in the scientific rules of finance and accountancy.Activities of the internal controllers may include:Separation of the authorization, recording the roles to prevent fraud by any of the people.Some transactions are being reviewed by an appropriate person Maintaining the transactions that will surely suit to an organization (Schroeder, J. H.,2015)Internal controllers play and important role in the prevention of the frauds and for anymisappropriation. They are required to perform a fraud risk assessment and use to access therelated controls. Their objective is to provide the reliable reports, compliance with the law, andto follow the policies and procedure as per the accounting standards in recording thetransactions. This is the important aspect through which the resources are monitored, directedand measured. (Peltier, T. R.,2016)They use to detect the fraud and try to protect the firm both assets (tangible assets) as well asthe intangible assets like reputation and the intellectual property rights like trademarks.The internal controllers play a role of management as well as the board of directors. Since theyare responsible for the overall responsibility of the firm for the implementation of the effectiveinternal control. Moreover, they are only responsible for the procedures as BOD are verycapable of handling all the issues by themselves. So the internal managers are responsible for the internal controls and the risk assessment of thecompany by identifying before it creates an issue.( Knechel, W. R.,2016)(ii.) Role of an external Auditor as an Assurance Provider An external auditor performs an audit as per the specified laws made by in the company’s Act1981 and as per the amendment act of 2013 they use to analyze the financial statements of the

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