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Internal Control Procedures in Business
Question 1 – Question and Answers
1. What does Corporate Governance refer to?
Corporate governance can be termed as the Direction and internal control by way of rules, practices,and processes. Corporate governance helps to safeguard the interest of various segments such as Stakeholders, customers, suppliers, government etc.
2. What are the most important recognized sanctioned authoritative bodies in the Australian financial service industry?
The most important recognised sanctioned authoritative bodies are The Australian Securities and Investments Commission (ASIC) responsible for supervision, Reserve Bank of Australia (RBA) responsible for assessing the clearing and settlement as per Financial Stability Standards (FSS), Treasury responsible for development of economic policy, The Australian Prudential Regulatory Authority (APRA) is a regulatory body for financial agencies and Council of financial regulators (CFR) which aid to provide effectiveness and efficiency in Australian Financial System.
3. What is Internal Control?
Internal control systems are established by the organisation to increase the productivity and efficiency in order to achieve the organisational goals and objective along with the integrity of financial and accounting information.It also acts a control and checkssystem over the processes carried out.
4. What is an account manager responsible for?
The account manager is responsible for maintaining a relationship with the customers. They are the face of the company and need to maintain the existing customers and also acquire new business over the time.
5. What is a balance sheet and what is its purpose?
The balance sheet is a statement which consists of Assets owned, Liabilities to be paid and Capital a point of time in order to provide the management how strong the financial statements are and the financial position of the company (Bova, et. al., 2013).
6. Briefly describe the term ‘stakeholder.’
Stakeholders can be called as the one which has interest in the organisation and can be effected and effect by the organisation workings, plans,and policies. They can be Shareholders, Creditors, Directors, Employees and in modern times Government and community also from which they are able to draw resources for their business. They can be internal as well as external (Slabá, 2016).
7. What is an effective method of internal control procedures and why?
An effective method of internal control procedures is Reconciliation. Reconciliation refers to the matching of the accounts with that of other entities such as banks. It is an effective method of internal control as it helps in better controlling. The balances can be checked on a regular basis and error can be detected (Ingram, 2017).
8. What procedure would you use when monitoring a policy?
The policy can be monitored by effective planning and Implementation of the method. The impact of the policy must be checked and the result must be analyzed. In the case of unfavorable result preventive measure must be taken and made the necessary adjustment.
9. What are the guidelines used for a corporate governance strategy for accuracy?
The guidelines used for corporate governance strategy is:-
- Setting up of responsibilities and delegation of authority
- Decision making should be made effectively and efficiently by way of acode of conduct
- Financial statements must be audited and checked
- Disclosure of matters timely
- Facilitating rights of shareholders by transparency
10. What are key performance indicators? Briefly describe the term
Key performance indicators can be defined as the measurement of achievement of goals and objective by the organisation effectively and efficiently.They can be used to measure the overall performance of the organisation as well as the process. Key performance indicator can be used to measure financial as well as non-financial activities (Iveta, 2012).
11. What is an audit trial for accounting purposes?
Accounting trial is a recording of the Data securely in order to get documentary evidence at any point in time. It helps to identify and reconcile any transaction if required. It also helps in better controlling and recording of the data.
12. What reasons are there for a company to improve its corporate governance?
Corporate governance helps in increasing accountability and responsibility in order to facilitate correction decision making. It also helps in finding out the problems and eliminating it. It helps in building the relationship with the stakeholders and improving the image through transparency.
13. Discuss ethical considerations and confidentiality for management and handling of files and records.
The files and records are the most important part of the business. If there is illegal disclosure, alteration or retention of the data it may lead to an ethical crisis. The disclosure and authority to view the data must be checked on a regular basis along with the security of vital and sensitive financial data.
14. Identify and explain the key features of financial legislation relating to taxable transactions and reporting requirements.
Financial Legislation looks and governs that the transaction is being done as per the law, The Standards and guidelines are being followed by the organization. They also keep on updating the financial system along with coordination with different departments.
15. Explain a range of methods of work practices and routines relevant to internal control procedures.
One of the methods is Job rotation and segregation of duties along with relationship building. Independent reviews must be performed to keep getting updates. The employee must be made motivated and responsible for their work. Records must be written and made in order to analyze the performances
16. Organisational guidelines and procedures relating to:
Corporate governance – The Corporate governance is for delegation and accountability of the responsibilities to different personnel of the organisation. Transparent rules, social responsibility along with profitability are some of the organisation guidelines.
Financial delegations and accountabilities – The delegation and accountabilities can be set so that decision can be taken effectively. The procedure is to determine what, when and how to delegate, Follow up for accountability, Delegation of responsibility, Identify problem-related to delegation and overcome it.
17. Key principles of internal control and auditing
- Establishment of responsibilities
- Record maintaining and independent reviews
- Job Rotation and segregation of the duties Relationship building and controls
Question 1 – Internal Control Requirements
How you would implement and maintain internal control procedures.
Internal controls are methods used by the organisation to achieve the organisational goal along with the making and compliance of financial statements and activities.
Internal control must be implemented keeping in mind the objective to be attained with the help of internal control. It must be strong enough to keep a regulatory check over the process of the internal control. The best suitable and effective control system must be made keeping in mind the view to achieve the organisational goal. Before implementing to the whole of the organisation it must be implemented to as on trial basis. Reconciliation must be done so that any problem and shot coming can be identified in early stages and overcome it. The Internal control procedures can be maintained with regular checks and improve the same. Feedback must be taken by the employees to make it better and strong. They must review the system on regular basis and also must be audited.
Question 2 – BRB Pty Ltd
1. Identify the errors in the policies and procedures of BRB Pty Ltd?
The policies and procedures that are being followed by BRB Pty Ltd had alot of errors. The steps were not properly followed. The person was recruited without checking with the previous employee. Though the degrees were there, the employer must have cross verified the details but it was not done. There was no training provided nor was proper check system kept which led to even fraud and conflicted relationship with the channel partner.
2. Analysing corporate governance requirements
a) Identify which are the most suitable principles of corporate governance requirements given by ASX in this given scenario, and then provide a justification for each principle you have identified in order to develop the application of corporate governance requirements, to help the company to prevent such fraud happening again.
The most suitable principle of corporate governance is Act ethically and responsibly and Safeguard integrity in corporate reporting. If there has been a code of conduct and was made understood by the customer he might not have done it. Also, it is the duty of organisation to safeguard integrity if there would have been audit committee the money provided by channel partner would have been detected on time (ASX, 2014).
b) You have identified the corporate governance requirements for BRB Pty Ltd. Before you take any action, you need to consult with the senior management and board members. You are required to do a role-play to conduct the consultation. You will be playing the role of the auditor and your assessor will be one of the board members.
Corporate governance is very important for the safeguard of interest of the stakeholders as well as the prevention of any fraud and misstatement in the organisation. With the help of principles of corporate governance, it would have been easy to detect the fraud even before the starting of the job. It would have helped in determining the true capabilities and make aware of the rules of the organisation which would have stopped him to do the fraud. Even if the fraud was committed it could have been detected by the Corporate governance.
c) Senior management wants to know the deadline. Complete the Gantt chart provided in Appendix for implementation of the corporate governance requirements that you have identified in section (a).
Setting of Audit committee
Making of Code of Conduct
Implementationof Code of Conduct
Feedback from the Audit committee and employees
Execution of changes and implementation as a whole
3. Internal controls analysis
a) Review the financial delegations and accountabilities for BRB Pty Ltd. Is the existing system strong enough to maintain internal control? Why or why not?
The Existing system is not at all strong. There were no financial delegations and accountabilities. No proper internal control system is there. There were no proper procedures for appointment of the employees. Details were not verified by the BRB Pty Ltd. The Training was also not provided nor any check system was adopted which cost the company (CPA, 2008).
b) Develop a procedure to modify the existing system of financial delegations and accountabilities. Your plan should ensure consistency and compliance with internal control procedure.
As per the scenario
a. There must be aproper cross-check of thedocument before providing of job
- Test and examination must be checked to ensure the capabilities
- Employee past experience must be taken and checked with previous employeeTraining must be provided and work must be made understood
- Employee feedback must be taken to know about their views
- The employees are the face of the company so they must be monitored until the trust is being built.
c) How would you implement the suggested changes? Your response should include actions to be taken, person responsible and timeframe.
The suggested changes can be done by setting the responsibility and accountability for the management. A training module must be made with aptitude test to check the abilities. It can be done within a timeframe 6Weeks which includes preparation of training module, implementation and result of the same and setting up of responsibilities and accountabilities.
1.ASX, (2014). Corporate Governance Principles and Recommendations. ASX Corporate Governance Council. Also available at http://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf.
2.Bova, E., Dippelsman, R. J., Rideout, K., & Schaechter, A. (2013). Another Look at Governments’ Balance Sheets: The Role of Nonfinancial Assets
3.CPA Australia. ( 2008). Internal controls for small business. CPA Australia. Also available at https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/business/internal-controls-for-small-business.pdf?la=en.
4.[Accessed on 19-12-2017].http://smallbusiness.chron.com/seven-internal-control-procedures-accounting-76070.html. [Online]. Also available at ChronIngram, D. (2017). What Are the Seven Internal Control Procedures in Accounting?. 5.Iveta, G. (2012). Human Resources Key Performance Indicators. Journal of CompetitivenessVol. 4, Issue 1, pp. 117-128. Also Available at http://www.cjournal.cz/files/89.pdf.
6.Slabá, M. (2016). Stakeholder profile and stakeholder mapping of SMEs. Littera Scripta, 9(1), 123-139.