Internal Control Procedures and Practices Assignment, FNS50215

This document presents a detailed response to an internal control assignment, addressing key aspects of financial management and accounting. The assignment begins by differentiating between internal and external audits, outlining their respective objectives and methodologies. It then delves into the core components of internal control, including the control environment, risk assessment, control activities, information and communication systems, and monitoring processes. The assignment further explores the significance of financial statement disclosures for investors, highlighting the role of annual and quarterly reports in investment decision-making. It emphasizes the importance of ethical values and a code of ethics within organizations, discussing business ethics, professional practice, and the impact of ethical standards. Additionally, the assignment examines stakeholder relationships, differentiating between internal and external stakeholders and the importance of stakeholder consultation. It also covers the principles of corporate governance, focusing on transparency, accountability, and security, along with the role of the Australian Taxation Office (ATO) in business activity reporting. Finally, it touches upon the significance of structured work practices across different departments within a company, highlighting their impact on overall productivity.

Running head: INTERNAL CONTROL
INTERNAL CONTROL
Name of the student:
Name of the university:
Author Note:

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Table of Contents
In Response to Question 1..........................................................................................................2
In Response to Question 2..........................................................................................................2
In Response to Question 3..........................................................................................................3
In Response to Question 4..........................................................................................................4
In Response to Question 5..........................................................................................................5
In Response to Question 6..........................................................................................................5
In Response to Question 7..........................................................................................................6
In Response to Question 8..........................................................................................................6
References:.................................................................................................................................7

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In Response to Question 1
The internal auditing is referred as the ongoing audit function which is performed
within the organization used by the separate internal auditing department. The internal
auditors are the auditors of the employees and they are hired by the company. The objective
of them is to review the routine activities and based on that provide suggestion based on the
improvements. The management of the company utilizes the internal audit and further
provide advice and other consulting assistance to the employees. Internal auditors of the
company issues risk associated with the business practices and risk associated with it and are
conducted throughout the year (Fracassi 2016).
The external audit is an audit which is performed by the independent body not
considered as the part of the organization. The significant objective of the external audit is to
analyze and verify the financial statement of the company. The external audit of the business
is conducted by the third party and the members of the report are the stakeholders of the
business. Further the opinion is provided based on the fairness and truthfulness of the
financial statement of the company (Gitman, Juchau and Flanagan 2015). The external
auditors further examines the financial records and opinion regarding the financial statement
of the company. The external audit is conducted based on the review services three times per
year.
In Response to Question 2
The key components of the internal control are as follows:
 Control Environment – The internal environment of the company consists of the
attitudes of the management, staffs and company as a whole. The internal
environment in that case must be manipulated by the organization (Knechel and
Salterio 2016).

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 Risk assessment – It is required to evaluate the risk which is identified by the
management is the riskiest areas in order to detect the frauds and errors resulting into
material misstatement of the company (Horst 2018).
 Control activities – The policies and procedure which are related to the management
where the objectives of the business are certainly carried out by the company.
 Information’s and communication – The information technology of the management,
accounting and communication system.
 Monitoring – The management use certain process in order to examine that the
internal control system of the company is working properly. In case of any kind of
significant loopholes in the system the management in that case tries to enhance the
control environment (Minsky 2016).
In Response to Question 3
The disclosures in the financial statement helps the potential investors to take the right
investment decision. In the disclosure of the company, there actually contains the set of
financial information which could rather influence the investment decision (Härdle, Chen and
Overbeck 2017). It assists the potential investors to take a look at the company’s financial
strategies and direction. Most of the disclosure documents are filed by the securities
regulator. The examples of this documents are based on the quarterly disclosure. Here are
some of the disclosure reports which are the 10K or annual report, 10Q or quarterly reports,
financial statements, prospectus are the key disclosures of the company.
The investors before making investment decisions analyzes the financial statement
which are produced in a yearly or quarterly manner. The annual report of the company is
being analyzed by the potential investor and based on that the key strategies of the company
are plotted by them (Pilbeam 2018). The current and past performance of the company can be

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analyzed and on the basis of that the internal and external stakeholders of the company takes
the significant investment decision.
In Response to Question 4
The ethical values must be applied to the each and every organization in order to run
the business successfully. Maintaining the ethical code within the system is important for the
company so that the goodwill and recognition of the company is maintained accordingly. A
code of ethics is a guide of principles designed to help professionals conduct business
honestly and with integrity. Code of ethics is referred to as the document may outline the
mission and values of the business or organization (Chalmers, Hay and Khlif 2019). This is a
professional way to approach problems where the ethical principles are based on the core
values of the organization's and are held as per the professional standard. Ethical code on the
other hand encompasses the significant areas such as business ethics, a code of professional
practice and code of conduct of an employee.
The value and purpose of the professional code of ethics is that it works as a guiding
principle of the business operations (Rezaee et al. 2018). The key issues which falls under the
umbrella of business ethics includes the relationship among the employer-employee, insider
trading, environmental issues and social responsibilities. There are certain ethical standards in
the business community which is basically dependent on the leadership of the business in
order to develop the code of ethics. The significance of code of ethics is that it states the rules
for behavior and further provides the groundwork for a preventive warning (Bentley-Goode,
Newton and Thompson 2017). Apart from the business size, the ethical standard must be
followed by each and every person in the organization.

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In Response to Question 5
The stakeholders of the company are the directors, employees, government, owners or
shareholders of the business. The stakeholders of the company are always aware of the
performance of the company (Peters 2015). A negative impact on the stakeholders of the
business actually puts a dent on the overall business growth and the financial performance of
the company. The stakeholders actually generate interest on the company which may or may
not affect the performance of the business. The stakeholders in the business are of two types
which are the internal and external stakeholders. Basically, the internal stakeholders in the
business generates interest through direct relationship with the employment, ownership or
investment. The external stakeholders of the company are not directly related to the operation
of the company but someway or the other takes notes regarding the action conducted in the
business.
The stakeholder’s consultation involves the enhancements of the product
relationship and construction over along period of time. Consolation enable to keep track on
the challenges, trends and perception of the particular group of stakeholders for a long period
of time (Ehrhardt and Brigham 2016). The consultation of the stakeholders further helps the
company to monitor the needs and expectations, perception and attitudes, specific planned
developments, implementation and actions along with the position and brand values of the
corporation. This helps to provide much greater outcome for the stakeholders of the business
(Soros 2015).
In Response to Question 6
The rule of corporate governance is applied within the system of the company by
which a particular organization are controlled and directed (Cochrane 2017). The upper level

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management of the company or further the directors are quite responsible in setting the
corporate governance. The corporate governance consists of the responsibilities, strategic
aims of the company which further sets of the core values of the organization. It also depicts
the day to day operation management of the company based on the full-time executives.
There are three components of the corporate governance principles which are the
transparency, accountability and security. The corporate governance pf the company stands
on these three pillars (Fisher 2018). It is significant for the company to show transparency in
the business which further means that the company is free from material misstatement and
fraudulent acts. The term accountability refers to the responsibility of the company in
maintaining the books of accounts along with preparation of the financial statement of the
company (Damodaran 2016). The third most significant pillars of all is the security which
means that the business of the company is secured from any kind of third-party hacker.
In Response to Question 7
The ATO is the Australian Taxation Office falls under the statement of the business
activity. The reporting must be done within the stipulated amount of time also referred to as
the deadlines (Leitch 2016). The reports which are prepared for the business purposes are
kept into record by the company and on the other hand it is also ensured that the particular
work is done within the deadline of the company.
In Response to Question 8
The work practices of the company are segregated among the various department
which are the marketing, finance, human resource and operations. This are the four main
divisions of the company and among it the core operation is conducted based on the
information provided from the higher-level authority particularly following an order or

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sequence. This further enhances the productivity of the business by adopting this kind of
work practices within the organization (Shoup 2017).
References:
Bentley-Goode, K.A., Newton, N.J. and Thompson, A.M., 2017. Business strategy, internal
control over financial reporting, and audit reporting quality. Auditing: A Journal of Practice
& Theory, 36(4), pp.49-69.
Chalmers, K., Hay, D. and Khlif, H., 2019. Internal control in accounting research: A review.
Journal of Accounting Literature, 42, pp.80-103.
Cochrane, J.H., 2017. Macro-finance. Review of Finance, 21(3), pp.945-985.
Damodaran, A., 2016. Damodaran on valuation: security analysis for investment and
corporate finance (Vol. 324). John Wiley & Sons.
Ehrhardt, M.C. and Brigham, E.F., 2016. Corporate finance: A focused approach. Cengage
learning.
Fisher, R.C., 2018. State and local public finance. Routledge.
Fracassi, C., 2016. Corporate finance policies and social networks. Management Science,
63(8), pp.2420-2438.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Härdle, W.K., Chen, C.Y.H. and Overbeck, L. eds., 2017. Applied quantitative finance (Vol.
2). Springer.
Horst, U., 2018. Introduction to Mathematical Finance.

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Knechel, W.R. and Salterio, S.E., 2016. Auditing: Assurance and risk. Routledge.
Leitch, M., 2016. Intelligent internal control and risk management: designing high-
performance risk control systems. Routledge.
Minsky, H., 2016. Can it happen again?: Essays on instability and finance. Routledge.
Peters, R.S., 2015. Ethics and Education (Routledge Revivals). Routledge.
Pilbeam, K., 2018. Finance & financial markets. Macmillan International Higher Education.
Rezaee, Z., Sharbatoghlie, A., Elam, R. and McMickle, P.L., 2018. Continuous Auditing:
Building Automated Auditing Capability. In Continuous Auditing: Theory and Application
(pp. 169-190). Emerald Publishing Limited.
Shoup, C., 2017. Public finance. Routledge.
Soros, G., 2015. The alchemy of finance. John Wiley & Sons.