Internal Control

Audits: Materiality, Risks, and Internal Controls
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The audit process is a set of eight sections, including materiality, risks, and internal controls. Auditors determine with reasonable certainty that financial statements are free from material misstatements. The only way auditors can complete this task is by determining the level of misstatements during audit planning, starting with preliminary judgments, and ending at using materiality when evaluating the audit findings. Auditors must consider various risks associated with planning and completing an audit. Risks which could affect the completion of an…...
Sales and Collection Cycle
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Introduction When engaged in auditing a public firm, such as Apollo Shoe Inc. , an auditor must determine when to trust in the company’s internal controls and when to ascertain auxiliary testing methods are obligatory to analyze control risks. The sales and collection cycle is rather a substantial fraction of the audit because this unique segment employs a multitude of documentation and records ranging anywhere from customer and sales orders, shipping documents, credit memos, and general journal entries; therefore, a…...
Client Memo – Internal Control
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Internal control is the method put into place by a company to be sure the integrity of financial and accounting information, meets operational, profitability targets, and transmit management policies throughout the organization (Investopedia). Control deficiency is the result of the design or operation of the control not allowing management, employees to prevent, or correct financial misstatements (Ken Plessner CPA). Material weakness occurs with the possibility of the material misstatement not being prevented, detected, and corrected on a timely basis (Ken…...
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Do Auditors Need to Have in-Depth Knowledge of Information Technology
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Yes, auditors need to have in-depth knowledge of information technology. Networks and computers deliver the most information needed for auditing to work. For it to be effective, auditors have to use the computer as an auditing tool, audit automated systems and data, and understand the business purposes for the systems and the situation in which the systems operate. The other important uses for networks and computers by auditors are in audit administration. By pursuing new uses for computers and communications,…...
Internal Control Over Cash
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Merchandise inventory is generally valued at the price for which the goods can be sold. reported under the classification of Property, Plant, and Equipment on the balance sheet. reported as a current asset on the balance sheet. often reported as a miscellaneous expense on the income statement. Items waiting to be used in production are considered to be finished goods. merchandise inventory. raw materials. work in progress. In a manufacturing business, inventory that is ready for sale is called store…...
The Case Analysis of Equity Funding
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The collapse of Equity Funding had a far-reaching influence on business practices and institutions. Although it happened over 30 years ago, the lessons from Equity Funding are still meaningful and constructive nowadays. Auditors of Equity Funding failed to collect sufficient evidence, check internal control and substantiate computer system. The audit premise----- understanding internal control system AUS 402.41 requires the auditor to obtain an understanding of internal control relevant to the audit. The effective internal control can provide “protection against human…...
Internal Control
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Pages • 11
Senior executives have long sought ways to better control the enterprises they run. Internal controls are put in place to keep the company on course toward profitability goals and achievement of its mission, and to minimize surprises along the way. They enable management to deal with rapidly changing economic and competitive environments, shifting customer demands and priorities, and restructuring for future growth. Internal controls promote efficiency, reduce risk of asset loss, and help ensure the reliability of financial statements and…...
Checklist For Evaluating Internal Controls in Business Management
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For publicly traded companies, the Sarbanes-Oxley Act of 2002 requires an audit of internal controls. The purpose of an internal control evaluation is to evaluate risk, which offers auditors a basis for audit planning and provides useful information to management ("Sox Law", 2006). Auditors typically use the five basic components of internal control to approve the entire system. According to Louwers, Ramsay, Sinason, and Strawser (2007) the five components to internal controls include control environment, risk assessment, control activities, monitoring,…...
?First Keystone Bank
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1. Prepare a list of internal control procedures that banks and other financial institutions have implemented, or should implement, for their ATM operations. Financial institutions should implemented the following internal control procedures. The first one is Risk Assessment, which means financial institutions’ management should identifies, analyzes, and manages risks that can affect the company. The second one is Control Environment, this procedure require management of the institutions attitude toward, awareness of, and actions concerning the internal control structure to in…...
Evaluating Internal Controls
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An organization’s internal controls are comprised of five components, which include: the control environment, risk assessment, control activities, monitoring, and information and communication. The five components of internal control are considered to be criteria for evaluating an organization’s financial reporting controls and the bases for auditors’ assessment of control risk as it relates to an organization’s financial statements (Lowers, et. al., 2007). “Thus, auditors must consider the five components in terms of (1) understanding a client’s financial reporting controls and…...
Howard Street Jewelers Case Study
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1. The Levis overlooked several internal control concepts that could have prevented Betty’s embezzlement from the company. • Segregation of duties: Betty had responsibilities in too many areas. She maintained the cash, the cash receipts, and the sales records for Howard Street Jewelers. This not only provided Betty with plenty of opportunity, but also gave her the means to conceal the theft. • Authorization of transactions: Betty was able to put items on layaway without authorization from management. • Physical…...
Feet case study
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The item that seemed to really call my attention as being a problem is some of the profitability ratios. Starting with the Gross Profit margin, it seems at the moment that Just Feet makes $41.62 in 1999 and in 1998 $41.53 in profit, but it cost the company more to produce than what they are making in profit. This shows that they need to lower their costs in making their product to be more profitable. The company has not even…...
Evaluation of Comptronix Corporation: Identifying Inherent Risk and Control Risk Factors
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1. Professional auditing standards present the audit risk model, which is used to determine the nature, timing, and extent of audit procedures. Describe the components of the model and discuss how changes in each component affect the auditor’s need for evidence. The audit risk model is used to determine the nature, timing, and extent of substantive audit procedures. The components of audit risk model usually stated as follows: DR = AR/(IR x CR) Where: DR = detection risk; AR =…...
Audit failure
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AUDIT FAILURE OF WORLDCOM Group 1 Background • WorldCom, first named LDDS (Long Distance Discount Services), grew largely by aggressively acquiring other telecommunications companies in 1990s. • For a time, it was the United State's second largest long distance phone company (after AT&T). Background However, the year 2002 comes… • In March, the SEC began to investigate WorldCom as it reported large profit while AT&T reported loss. • In May, Arthur Anderson was replaced by KPMG as the audit of WorldCom. Background • In June, a small team…...
Improvement of Internal Control Weaknes
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In Improving weakneses on the internal control PCI Sdn Bhd should develop more comprehensive Standard of Procedure on preparing Purchase transaction also the accounting preparer role treatment. Refer to the first problem occur where planning section should not easily give MMR to En.Razi without any proper authorization, there should be the MMR must be authorized by their head department first before sent to En. Razi to recheck the exactly amount and sent to his manager to double check it and…...
Internal Control Procedures in Accounting
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Culotti’s Pizza operates strictly on a carryout basis. Customers pick up their orders at a counter where a clerk exchanges the pizza for cash. While at the counter, the customers can see other employees making the pizzas and the large ovens in which the pizzas are baked. Instructions: Identify the six principles of internal control and give and example of each principle that you might observe when picking up your pizza. (Note: It may not be possible to observe all…...
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