Factors, Effective Internal Controls, And Weaknesses In Essay, Finance, And Accounting.

1. Identify and briefly discuss five (5) factors at SCU you would need to consider in your assessment of the effectiveness of SCU’s control environment?
2. Identify five (5) effective internal controls in the system and determine for each internal control, the risk that the control would/could mitigate.
3. Identify and briefly discuss ten (10) weaknesses in internal control for sales and trade receivables that you would bring to SCU management’s notice in your management letter.

Factors for the Effective Control

Generally, this research study is provides detailed information about the concepts used in auditing, finance and accounting. Moreover, in the context of the paper, a case study is given to address the research questions and objectives. Additionally, the first section of the research paper would provide detailed information about the fundamental factors that an auditor could use in order to analyze the effectiveness of company’s control environment. The second research question is address and evaluates five major effective internal controls in the system with regards to SCU. Finally, the last research question would analyze the major weaknesses in internal control for sales and trade receivables of the company.

The following discussed are the fundamental and specific factors that should be considered by the auditor of SCU in the effectiveness of control environment of the company.  

Operating style and Thinking: The auditor would assess the disposition, activities and practices of representatives with respect to the budgetary revealing. In addition, a business firm may confront distinctive sorts of business dangers if the theory and working style is not viable and fitting. For case, this may create innate hazard in the organization and there would be negative effect on the achievement of the firm. Subsequently, a business could experience budgetary and operational dangers because of poor reasoning and working style (Thomas and Chizek, 2003).

Communication and Ethical Factors: These most valuable and comprehensive tools or factors components ought to be considered by the examiner of SCU keeping in mind the end goal to get to the adequacy of control condition. For instance, the evaluator would require know and comprehend that the organization is advancing genuineness and uprightness among the workers on the everyday premise by creating and making moral and lawful approaches and benchmarks. In addition, it would likewise be investigated that how the representatives are speaking with their clients and others. In addition, how the administration of the organization is managing representatives and low level chiefs on an everyday premise. The reviewer would get to and dissect the moral gauges and systems received by the organization in leading of different budgetary, and non money related exchanges and practices (Tickner, 2012).

HRM policies and methods: It is likewise more critical for an examiner to break down the present human asset administration related practices; techniques and approaches keeping in mind the end goal to get to the adequacy of SCU's control condition. It is on account of getting to of HRM related practices of SCU would help the evaluator to comprehend the huge matter identified with the control cognizance. This would help the evaluator in decreasing the hazard connect with the material misquote (Whittington, and Delaney, 2011).

Responsibility and Authority:  The auditor would break down the size of operations and size of workforce at the SCU. Furthermore, the inspector would likewise need to consider to the expert and obligation of task. In addition, the inspector would be capable not exclusively to guaranteeing that both duties and experts are composed adequately and fittingly additionally he/she would need to comprehend the quantity of experienced, skilled and qualified people. For instance, the reviewer would require guarantee that approval pecking orders and in addition detailing connections are in the place or not (Bamber, and Parry, 2014).

Effective Internal Controls in System at SCU

Structure of Company: By breaking down hierarchical structure the examiner would have the capacity to business capacities and operations of the organization. The reviewer of SCU would investigate the esteem, standards, benchmarks, arrangements and business strategy.. Additionally, the nature of business exercises would likewise be investigated to get to the adequacy of control condition. For example, it is imperative for an evaluator to build up a positive and direct relationship among the level of inborn hazard and size and multifaceted nature inside the organization's business operations and capacities. Similarly, the examiner must get to the level of danger of material error in the general authoritative structure of the organization in type of duty, obligations, specialist, and lines of revealing meet the normal goals (Stickney, Weil, Schipper and Francis, 2009).

The following are the major effective internal control in system at SCU such as:

Information and Communication: It is likewise play a key and crucial part in the inside control arrangement of the organization. These are the most profitable and huge components of inner control framework that assumes critical part and capacities during the time spent gathering and additionally spreading imperative and important data all through the organization. Besides, both correspondence and data is considers business framework that gather particular and solid data with regards to inside control and administration. This data is utilized by the organization and its administration to bolster their representatives with the goal that they might achieve their key objectives successfully (Drake and Fabozzi, 2012).

Monitoring: It can be characterized as the present input apparatus that guarantees that the organization's inward control framework are composed, made and created in a successful and more imaginative way. Also, there are a few standards and techniques are utilized for the viable observing including continuous testing of existing control exercises and procedure to take after when business forms change. In addition, it is likewise require a particular procedure of correspondence for the viable interior control (Ruppel, 2006).

Operating Environment: It is also known as control environment that is hierarchical air by which representatives, administration and other authoritative individuals lead their capacities, parts, obligations and complete their own particular control liabilities. In addition, this climate is assume a key part in giving guidance to the workers with the goal that they might comprehend their hierarchical parts, capacities and errands. Furthermore, it likewise demonstrates that, the general population of the organization are completely learned, devoted and resolved to satisfy their destinations and objectives by considering moral standards and behaviors. They are completely at risk to perform different capacities according to the arrangements and benchmarks of the organization (Blanchard, Griebel, Pobbe, and Blanchard, 2011).

Risk Assessment: It is about reconditioning organization's business operations and also prepare where interior control is basic, profitable and huge. In this control framework, different sorts of dangers are consented and broke down to accomplish the general goals. At some point this framework expresses that what can turn out badly. Thus, keeping in mind the end goal to finish a hazard evaluation arrange, the organization would need to explore the business cycle in the detail (Lobo, and Zhao, 2013).  

Weaknesses

Control Activities: These are the particular and most solid exercises that directed by the organization with a specific end goal to guarantee that the inside control framework is compelling and suitable. These control exercises are made by the organization keeping in mind the end goal to break down and address and unravel the danger of the association successfully. The consequences of control exercises are impart to administration to representatives to achieve the targets of inward control framework. Similarly, these assume significant part in the general achievement and development of the organization (Choudrie, and Middleton, 2013).

The following are the key weaknesses found in the control environment of SCU

Absence of Centralized System: The Company does not have any incorporated framework to exchange and offer the imperative data identified with charging, invoicing and bookkeeping. For instance, the framework utilized by the organization is just creating matured examination at month and this has been handled into the other framework. This shows the organization does not take after the essential of centralization that may make a few difficulties for the organization. In addition, in get ready matured examination, the organization and its representatives need to invest more energy and exertion so it is exorbitant for the organization (Cascarino, 2007).

Shortage of Accounting and Financial experts or professionals: The Company does not have any master of expert to direct the exchanges identified with exchange. For instance, in the organization, the agent is just the individual that is mindful to check and get ready compromise of the exchange receivables record. In this circumstance, the organization may confront a few hazard and difficulties on the grounds that the shot of misrepresentation and error may happen in the organization (Bradley, 2010).

Billing and invoicing records are not appropriately recorded: This is the most imperative shortcoming in the inward control condition of the organization that could have negative effect on the aggregate achievement of the organization. For instance, the unauthentic and informal bookkeeping exchanges can be gone into the SCU's bookkeeping and monetary records. It can influence the level of monetary data at the organization and make question and struggle with client. Thus, it would be add up to loss of goodwill (Gramling, O'Donnell, and Vandervelde, 2013).

No Proper Credit Control: It is another shortcoming in the inside control arrangement of the organization that the salesmen and in addition assistants are mindful to play out the capacities identified with the credit control. For instance, this hazard would make the issues identified with terrible obligations. It is on account of Sales People and Clerk would just be dependable to boost the enthusiasm of clients not limit the awful obligations (Brown, and Cox Jr, 2011).

Insufficient controls on opening of client accounts in the trade receivables ledger: This may influence the achievement of the organization in the market because of expanded danger of misfortunes accordingly of terrible obligations emerging on deals to un-reliable demographic and a risk of annihilation thus of conveyances to invented customers (Cascarino, 2007).

Use of Manual Delivery Notes for the Sales Transactions: SCU does not have a particular innovation to lead report and play out the business exchange of the products and administration. The organization is manual framework to record and report the exchange that is making acquires hazard for the organization. For instance, if there should be an occurrence of loss of manual conveyance takes note of, the administration of the organization would not ready to comprehend distinctive parts of offers (Drake, and Fabozzi, 2012).

Use of Volume rating system:  according to the organization arrangement, enormous rebates are given to the esteemed clients by utilizing volume rating framework. This may make dangers and difficulties for the organization in making rebates in regard to the non-finished deals exchanges that contrarily influence the productivity of the organization and results in low piece of the overall industry (Brazel, Jones, and Prawitt, 2013).

Trade receivable aged analysis take longer time: The case obviously shows that, the monetary chief of the organization is not getting the receivables matured investigation in a brief timeframe. It takes over 90 days that may bring a few inborn dangers for the organization. For instance, there might be odds of extortion, botch, and improper utilization of resources.

Advance receipts to Customers for the product: Due to the deformity in the item, the client sent back item to the organization and organization does not get the first bill from the clients that is a noteworthy issue in the inside control of the organization. In addition, there might be a few ramifications because of this. For case, the deal income of the organization can be perceived inaccurately and improperly (Brigham, and Daves, 2009)

Conclusion:

On the premise of above discourse, it can be inferred that, control environment of an organization reflects center qualities, standards, techniques, approaches and business strategies. In addition, it is additionally examined that, with a specific end goal to get to the viability of control condition, an examiner must consider different variables. Additionally, it can likewise be inferred that, few sorts of successful inside controls in the framework could be utilized adequately. At long last, it can be reasoned that, business associations ought to embrace legitimate strategies, methods, procedures and courses with a specific end goal to maintain a strategic distance from shortcomings in their inner control frameworks.

References

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