Internal Control Assignment 2022

Running Head: INTERNAL CONTROL 1
Internal Control
Student Name
Institution Affiliation
Instructor’s Name
Date

INTERNAL CONTROL 2
Introduction
Internal controls refer to policies, procedures, mechanisms, and rules that guarantee the
accuracy and reliability of both accounting and financial information (Abdallah, 2017). There are
two categories of internal control procedures; preventive and detective internal control
procedure. Preventive internal control procedure detects fraud and errors before they happen.
They include segregation of duties, control of access, authorization, and thorough
documentation. Detective internal control procedure identifies events that have been missed in
the first line of defense. They include periodic reconciliation of accounting information, internal
audits, and external audits. Internal controls are essential to every organization because they
detect and prevent fraud, increase operational efficiency, and promote the integrity of accounting
information. This report is going to analyze two organizations, Apple Inc. and McDonald's,
regarding how they undertake and maintain internal control procedures.
Apple Inc. is a technological company that designs, develops, and sells computers,
peripheral devices, and software and music players. Apple Inc. is the leading company in world
innovation of I phone, I pad and MacBook computers. McDonald's is an American fast food
company. Its products include fries, burgers, and hamburgers. It reaches many customers through
its outlets in different counties. Both Apple Inc. and McDonald’s adopt internal control
procedures to detect and prevent fraud, increase operational efficiency, and promote the integrity
of accounting information (Cade, 2018).
Internal control procedures
Both Apple Inc. and McDonald’s undertake seven internal control procedures such as
segregation of duties, authorization, and physical access control, periodic reconciliation of

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accounting information, thorough documentation, and physical audits (Hardwick, 2016). First,
the two companies undertake the segregation of duties by subdividing duties in the finance
department. The split duties entail bookkeeping, auditing, reporting, accounting, settlements,
dealings, and deposits. The two organizations maintain segregation of duties by employing
different staffs with different duties in the finance department. Some of the team include
auditors, accountants, bookkeepers, and financial reporters. The two organizations also maintain
segregation of duties through procedure documentation to outline methods of performing
specific tasks and positional descriptions that clearly specifies the roles of different staff in the
finance department. Additionally, they also maintain the segregation of duties through an
organizational structure that creates different working spaces for various staff in the finance
department. Segregation of duties aims to minimize the chances of committing fraudulent
activities.
Second, both Apple Inc. and McDonald’s undertake access controls by installing
passwords, biometrics, lockouts, and electronic access log (Honore, 2015). The access controls
prevent unauthorized people from accessing accounting systems to compromise the auditing
process. The two companies maintain the physical access controls by regularly changing
passwords and updating both the biometric systems and electronic access log. Third, both Apple
Inc. and McDonald’s undertakes and maintains reconciliation by ascertaining whether balances
in accounting systems match with balances in various entities such as banks, suppliers, creditors,
and customers. For example, both Apple Inc. and McDonald’s conducts bank reconciliation to
ascertain whether the bank's balances match with cashbook balance. Reconciliation assists in
identifying errors such as error of omission, commission, and double entry.

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Fourth, both Apple Inc. and McDonald’s undertake and maintain approval and
authorization by mandating departmental managers to approve transactions prior to their
implementation. Approval is done by seeing, analyzing, and accepting payment and expenses.
Approval and authorization prevent employees from committing fraud using the company's
money. Fifth, the two organizations undertake and maintain documentation by keeping
standardized documents of invoices, receipts, requisition, and expense reports. Standardized
documentation maintains consistency in record keeping and also enables a thorough comparison.
Reports
Both Apple Inc. and McDonald’s undertake and maintain internal control through
reporting (Honore, 2015). Thus the two organizations prepare different reports such as daily
settlement reports, cash flow reports, exposure reports, and bank account reports. Cash flow
reports show the amount of cash flow that the respective companies generate from operating
activities, investing activities, and financing activities. Thus, all departmental units prepare cash
flow projections per week, month, and year. Daily settlement reports indicate the day-to-day
activities that were conducted by each company. Thus, the two companies have a regular system
that keeps the data of events that occurs per day in the corporate environment. Bank report
indicates transactions that occur per day, month, and year. The two companies prepare bank
reports by extracting data from the electronic banking system. The exposure report indicates
various risks to which the company is vulnerable. Companies make exposure reports by scanning
the environment to identify both internal and external threats.
The two companies also prepare an operational report that includes management, board,
and exceptional report. Operational reports inform companies’ shareholders about the financial