This is because this approach is reactive in mitigating the impact of a loss rather than preventive in protecting the company from a loss. Portfolio Approach Unlike, the insurance approach the portfolio approach has more structure and complexity. It is crucial that all companies have a solid internal control structure, based on strategic managerial planning and control.
In addition, this system establishes reliability in financial data along with establishes compliance with laws and regulations set forth from regulations like the SOX Act. One believes an internal control system will help protect the company from uncertainties as well as ensuring the company is operating in proper accordance with its mission and goals.
How to Write a Summary of an Article? Leadership confronts you, as a controller, and questions the need for an internal control system. This type of system ensures the protection of company assets through a system of policies and procedures. The portfolio approach is an effective approach but is more reactive than preventive.
Internal controls ensure that employees are given unique personal identification numbers to use in logging on to the financial and other systems in the organization. Internal Controls ensures that there are checks and balances incorporated into the system.
Current Approaches Insurance Approach Insurance is not as large as it can be for a company because it is a way of looking at the risk along with knowing that an acceptance of loss is present for a company.
Control activities are the various policies, rules, authorizations, verifications, reconciliations, methods and procedures necessary to bring about the achievement of goals and objectives.
One of the problems that are inherent with the insurance approach is that it is very costly, and can cost companies thousands of dollars per year in cash that could have otherwise been allocated elsewhere. Again, Federal laws Sarbanes-Oxley Act, section govern the use of these statements.
All companies should use an insurance approach to protect their assets to the most reasonable extent possible.
Solution Summary Leadership confronts you, as a controller, and questions the need for an internal control system. More Essay Examples on Auditing Rubric Regardless of the size, internal controls play a crucial role in any organization. However, the insurance approach is more of a tool for risk financing than a tool for risk management.
The control environment sets and directs the tone at the top of the organization. When we use a portfolio approach, we evaluate each part or segment separately in order to arrive at a consensus as to the actions that should take place in order to reduce risk.
An effective system of controls increases transparency and credibility of an organization; ensures the integrity of financial reports, reduces errors, and fraud; ensures the safety of resources and helps in compliance with regulatory standards.
To overcome this dilemma, the creation of the Sarbanes Oxley Act SOX of requires corporations to take full control over its financial reporting and accounting by placing internal controls within its organization.
A system of Internal Controls helps organizations to comply with these requirements. It helps to ensure that no incompatible duties e.
This is an effective way to mitigate risk, but is not comprehensive enough to be used as a standalone measure for risk mitigation.Justification for an Internal Control System - Part 3 Organizations exist to carry out their set goals and objectives - Justification for an Internal Control System introduction.
To achieve these goals, they must have a set of rules that direct their efforts toward the achievement of these goals and objectives. Justification for Internal Control Essay. firm, it is my duty to re-evaluate the control systems of this company, both internal and external.
As the current control system is working appropriately, there is a need for more, which further justifies the need for an internal control system.
Running head JUSTIFICATION FOR AN INTERNAL CONTROL SYSTEM Justification of an Internal Control System Jen Russell University of Phoenix Justification of an. Justification for an Internal Control System Crystal Spencer University of Phoenix ACC/ Internal Control Systems Christina Yang May 14, The purpose of this brief report is to justify the need for the internal control system in any organization, when controls are.
Aug 22, · Justification for an Internal Control System Frank Harling ACC/ April 2, Christian Yang Justification for an Internal Control System Working as the controller for this company I am accountable for all of the accounting operations. JUSTIFICATION FOR AN INTERNAL CONTROL SYSTEM 2 Justification for an Internal Control System Insurance and portfolio approaches are good controls, but they are not enough to protect the company from risks.
As a controller I encourage you and your leadership team to increase the internal controls in .Download