Internal Control System Checklist ACC/544 Monday December 03, 2010 Dr. YouKnew Abstract Internal control systems are purposed to aid in managing an array of risks, while monitoring the integrity and reliability of operational and financial data.
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Ethical Governance and Standards Ethical standards are the groundwork for internal control systems, where integrity is the basic principle. Business ethics show characteristics of acceptable business conduct, while ethics in internal control systems ensures that these standards are communicated, executed, reinforced, and monitored. When considering the following checklist for evaluating internal controls, three phases of the control evaluation are also applied. The three phases are understanding, assessment, and testing. I. Ethics & GovernanceYESNOComments Are the ethical standards exemplified by the board of directors?
Are ethical standards reviewed with new employees either in orientation or by pamphlet? Are the ethical standards woven into employee evaluations? Are handbooks provided for ongoing review of ethical standards? Is there a process in place to review and correct bad ethical calls? Are ethical standards woven into business standards? Are fraudulent attempts in reporting communicated as intolerable to employees and management? Electronic Data Processing Electronic data processing guarantees against improper human intervention with computer processing and other transactions in a given organization.
Computer programs help prevent access to certain information across departments and roles. Within the phases of the control evaluation the auditor would want to ensure that each user completely understands his role and to protect the privacy of information given access. Ongoing assessment should be afforded to help each department head better manage user access and testing to ensure compliance. II. Electronic Data ProcessingYESNOComments Are policies in place to include reference check, security, and termination of employee security measures?
Are the duties within the data processing system adequately segregated per role? (such as technical support, software developer, ect. ) Is the Electronic Data Processing system separate and independent from the operating and accounting departments? Is the Electronic Data Processing system such that it prevents duplicate documents from being introduced to the system? Are there adequate controls preventing changes to master files? Are there adequate controls over data entry to include supervision, current instructions, key verification of important fields and self check digits?
Financial Reporting One of the three distinct objectives of internal control is to meet the responsibility of ensuring that financial statements are reliable. The term reliable involves the preparation of financial statements that are fairly presented in conformity with applicable financial reporting framework employed by management. The system of financial control over financial reporting therefore includes the design and implementation of policies and procedures necessary by managers to provide reasonable assurance that the ompany’s statements are presented in accordance with the basis of accounting. Evaluation of financial reporting within internal control system should place emphasis on testing and assessment. The following checklist addresses some key areas of testing and assessment of internal control of financial reporting. III. Financial ReportingYESNOComments Is the statement of financial position prepared monthly and reviewed by management and the finance committee? Are the responsibilities for the final review and approval of financial reports segregated from those for the preparation of reports?
Are monthly, semi-monthly and annual reports prepared comparing income and expenses with approved budget and reviewed by the management and the finance committee? Did the company employ a char of accounts? Are the tasks for maintaining the general ledger suitably segregated from those for the custody of assets? Is there a written accounting policy and procedural manuals distributed to appropriate personnel? Checklists mainly service as a tool that both managers and auditors can use to review a specific departments internal control and for ongoing purposes also.
Checklists should be both drafted and assessments completed by management who are accountable for the business processes. When completing the checklist, simple yes or no responses prove a strong or weak internal control system where additional notes for improvement are observed. Multiple questions are needed to make the proper assessment of a control system
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