Get Instant Help From 5000+ Experts For
question

Writing: Get your essay and assignment written from scratch by PhD expert

Rewriting: Paraphrase or rewrite your friend's essay with similar meaning at reduced cost

Editing:Proofread your work by experts and improve grade at Lowest cost

And Improve Your Grades
myassignmenthelp.com
loader
Phone no. Missing!

Enter phone no. to receive critical updates and urgent messages !

Attach file

Error goes here

Files Missing!

Please upload all relevant files for quick & complete assistance.

Guaranteed Higher Grade!
Free Quote
wave

Introduction to Internal Control

Question:

Disucss about the Five Component of Internal Control & the Model that Govern Internal Control with ISA315.

Internal control (IC) is defined as the process for ensuring achievement of the organisational objective and adding to operational effectiveness and efficiency. Internal control ensures the reliable reporting of the various aspects of the financial reporting and the state the facts for compliance of the laws in an organisation. The similarity in the internal and the external audit has been seen in the nature of the audit process. Both the process aims to assess the possibility of fraud or theft. In addition to this, both the process is associated to compare the regulations and the laws with the actual operation of the firm (Singh et al., 2014).

The various types of the division of the internal control is seen to take into consideration various types of the consideration which has been seen to state the purpose of SSA and useful framework for the auditors  to consider the various types of the entity’s internal control. The factors affecting the internal control have been further based on control environment, assessment of the risk procedure of the entity. It has been further seen to be related to the consideration of the various types of the relevant financial reporting, communication and business process. Some of the other components have been further considered as per the control activities and monitor of the control techniques (Lin etal., 2014).

The five components of the internal control of the entity have been discussed below as follows:

  1. The control environment
  2. Process of risk assessment of the entity
  3. Information system based on the associated business process linked with the financial communication and reporting
  4. Control Activities
  5. Monitoring of the control activities

It has been further seen that as per the guidelines of SSA, the main contributing factors for the internal control has been identified with the implementation and maintenance of reasonable assurance for the achievement of the entities objective. This has been further associated to ensure the reliability and effectiveness of the financial reporting and maintain the overall efficiency(Chang, Yen, Chang, & Jan, 2014). As per the guidelines of SSA controls refers to the consideration of one or more components of the internal control.  It has been further discerned that the model for the internal control governance is implemented by the Board of Directors and risk management system (Kubuabola, 2013).

 The primary purpose of IC is to assist an organisation in screening, detection and prevention of fraud. The linking of the external audit has been seen to be thoroughly revised with the entire range of the transaction process. The internal control of the audit has been further seen to be proving the main form of the walkthrough based on the business process and verification of the financial records. The external auditors are also seen to determine the computer systems to perform correctly. The internal controls are further seen to be large enough for the employment of the individual’s record keeping which may vary as per the hiring of highly qualified accountant. The purpose of linking internal audit back to external audit has been mainly seen with periodic meeting off both the internal and the external auditors. It has been further seen that the various linking of the external and internal audit has been further seen to be conducive for avoiding redundancy in the task(He et al.,2017). In has been further seen that the exchange between the two groups will be able to ensure better coordination and in understanding the individual responsibilities. By maintaining the aforementioned measures the organisation has been able to maintain the data in a better way and ensure more integrity in the internal control   (Badara & Saidin, 2013).   

Components of Internal Control

Internal control will be effective in providing the entity with only reasonable assurance on achieving the financial reporting objectives. The likelihood of the achievement is seen to be inherent with the various types of the consideration of decision making which is may be faulty and lead to breakdown as per the internal control. The realities of the human judgement in the decision making process can be as a result of the human error (Lansiluoto et al., 2016). The controls can be circumvented with the collusion of two or more inappropriate control of management to override with the internal control. The designing and the implementation of the controls by the management has been seen with the judgement and the nature and the extent of the controls, which has been able to implement the extent of the risk. The operation of the control may also occur due to human error. For instance, the error may be seen to take place due to design or change of control (Coso, 2013).   The different types of the edit checks in the program of the software which may seen to be designed for the report and this has been further seen to be exceeded the specified credit limit which is overridden or disabled (Al-Rassas & Kamardin, 2015).

The recent case of analysing Internal control and trend of organisational threat of fraud has been depicted in Standards, Productivity and Innovation Board (SPRING Singapore) which is seen to be a statutory body under the Ministry of Trade and Industry in Singapore (COSO, 2013). According to the reports report published on 23 May 2017, there had been severe breach of internal control by two former employees who had been convicted of cheating the statutory board with an amount of S$ 50000 (Channel NewsAsia, 2017). Soh Hua Xiang and I Shu Hui had tricked SPRING in approval of a payout in tune of S$ 145000, in which the money had never been received. Mr Soh is accused of submitting false claims with a total amount of S$ 50000 in August 2015. He use the details of 18 sole proprieties of minimarts for lodging claims associated to the purchase of point-of-sales systems, without the consent of owners.  As per the hearing of the court, it had been discerned that Soh Hua Xiang identified suitable minimarts and passed the details of the same to I Shu Hui, who was responsible for checking whether owners had submitted ICV claims before. In case owners had not submitted ICV claims before, Soh Hua Xiang used the businesses details to lodge fake claims. It was further seen that the fraud involved creation of fake email address, forged quotations, doctored photographs, receipts and invoices. He was also accused of forging the signature of the business partners with individuals having joint bank account. Once the claims were approved, I Shu Hui (finance manager of SPRING) would approve the disbursement of the ICV grants into bank account of Soh. In this way the both of them pocketed an amount of S $ 50000 with the use of modus operandi (Daniela & Attila, 2013).

Importance of Internal Control


In the recent times, some of the advantages brought to SPRING by IC have been discerned with consideration of the different types of the measures for conducting the internal audit along with the Audit committee. The integrity and reliability in the financial statements has been further observed with maintaining of regular review system in the organisation.

The likelihood of the achievement is seen to be inherent with the various types of the consideration of decision making which may be faulty in the default case and lead to effective as per the implementation of internal control. The realities of the human judgement in the decision making process can be as a result of the human error. Henceforth, it is recommended to review the internal control before the application. The application of the of the various types of the internal control in SPRING has been further seen to based on the association of the internal auditors and meeting of the standards as per the professional practice of the auditors as set by Internal, Audit and Investigations team.  

Conclusion

The factors affecting the internal control have been further based on control environment, assessment for the various types of the risk procedure of the entity. It has been further seen to be related to the consideration of the various types of the relevant financial reporting, communication and business process. Some of the other components have been further considered as per the control activities and monitor of the control techniques. The application of the material on the internal control has been further seen to be conducive in understanding of components of the internal audit, nature and the scope of the understanding of the relevant control and controls related to the audit.

References

Al-Rassas, A. H., & Kamardin, H. (2015). Internal and External Audit Attributes, Audit Committee Characteristics, Ownership Concentration and Earnings Quality: Evidence from Malaysia. Mediterranean Journal of Social Sciences. https://doi.org/10.5901/mjss.2015.v6n3p458

Badara, M., & Saidin, S. (2013). Impact of the effective internal control system on the internal audit effectiveness at local government level. Journal of Social and Development Sciences, 4(1), 16–23. https://doi.org/10.5923/j.ijfa.20130202.05

Balsam, S., Jiang, W., & Lu, B. (2014). Equity incentives and internal control weaknesses. Contemporary Accounting Research, 31(1), 178–201. https://doi.org/10.1111/1911-3846.12018

Chang, S. I., Yen, D. C., Chang, I. C., & Jan, D. (2014). Internal control framework for a compliant ERP system. Information and Management, 51(2), 187–205. https://doi.org/10.1016/j.im.2013.11.002

COSO. (2013). Internal Control — Integrated Framework. https://doi.org/978-1-93735-239-4

Coso, T. C. of S. O. of the T. C. (2013). Internal control - integrated framework: executive summary. New York, (May), 1–20. https://doi.org/978-1-93735-239-4

Daniela, P., & Attila, T. (2013). Internal Audit versus Internal Control and Coaching. Procedia Economics and Finance, 6, 694–702. https://doi.org/10.1016/S2212-5671(13)00191-3

Former SPRING Singapore employees convicted of fraud. (2017). Channel NewsAsia. Retrieved 9 November 2017, from https://www.channelnewsasia.com/news/singapore/former-spring-singapore-employees-convicted-of-fraud-8875920

He, X., Pittman, J. A., Rui, O. M., & Wu, D. (2017). Do social ties between external auditors and audit committee members affect audit quality? Accounting Review, 92(5), 61–87. https://doi.org/10.2308/accr-51696

Kubuabola, S. (2013). External Quality Audit. External Quality Audit. https://doi.org/10.1016/B978-1-84334-676-0.50005-4

Lansiluoto, A., Jokipii, A., & Eklund, T. (2016). Internal control effectiveness - a clustering approach. Managerial Auditing Journal, 31(1), 5–34. https://doi.org/10.1108/MAJ-08-2013-0910

Lin, Y. C., Wang, Y. C., Chiou, J. R., & Huang, H. W. (2014). CEO characteristics and internal control quality. Corporate Governance (Oxford), 22(1), 24–42. https://doi.org/10.1111/corg.12042

Singh, H., Woodliff, D., Sultana, N., & Newby, R. (2014). Additional evidence on the relationship between an internal audit function and external audit fees in australia. International Journal of Auditing, 18(1), 27–39. https://doi.org/10.1111/ijau.12009

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2018). Internal Control: Definition, Importance, And Components | Case Study. Retrieved from https://myassignmenthelp.com/free-samples/five-components-of-internal-control.

"Internal Control: Definition, Importance, And Components | Case Study." My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/five-components-of-internal-control.

My Assignment Help (2018) Internal Control: Definition, Importance, And Components | Case Study [Online]. Available from: https://myassignmenthelp.com/free-samples/five-components-of-internal-control
[Accessed 16 July 2024].

My Assignment Help. 'Internal Control: Definition, Importance, And Components | Case Study' (My Assignment Help, 2018) <https://myassignmenthelp.com/free-samples/five-components-of-internal-control> accessed 16 July 2024.

My Assignment Help. Internal Control: Definition, Importance, And Components | Case Study [Internet]. My Assignment Help. 2018 [cited 16 July 2024]. Available from: https://myassignmenthelp.com/free-samples/five-components-of-internal-control.

Get instant help from 5000+ experts for
question

Writing: Get your essay and assignment written from scratch by PhD expert

Rewriting: Paraphrase or rewrite your friend's essay with similar meaning at reduced cost

Editing: Proofread your work by experts and improve grade at Lowest cost

loader
250 words
Phone no. Missing!

Enter phone no. to receive critical updates and urgent messages !

Attach file

Error goes here

Files Missing!

Please upload all relevant files for quick & complete assistance.

Plagiarism checker
Verify originality of an essay
essay
Generate unique essays in a jiffy
Plagiarism checker
Cite sources with ease
support
Whatsapp
callback
sales
sales chat
Whatsapp
callback
sales chat
close