The paper "Significance of Internal Controls to an Organization" is a perfect example of a finance and accounting coursework. Catch me if you can an American crime comedy film which is based on Frank Abegnale. Frank has advance skills of over-organized fraud in different entities where he poses in a different position to perpetuate frauds such as payroll frauds. Frank majors on confident crimes in different firm’ s which shows that most of the organization Frank reveal poor controls that he successfully commits frauds. Internal Control Internal control is a system of pertinent designed policies and procedures aimed at providing reasonable assurance that the organizational goals and objectives are achieved.
The internal control system is anticipated to give a sound assurance on the organizational reliability of financial reporting, enhancing management directives on compliance with rules and regulations (Plessis, 2007). Internal controls are evenhanded in safeguarding the organizational assets and promoting effectiveness and efficiency of operation thus promoting profitability measures. Internal controls are designed by the organizational board of director’ s management and other responsible personnel. The controls are designed based on their contributions to the organization. Significance of Internal Controls to an organization Internal control ensures that all the organizational transaction adheres to the policies and procedures set by the management.
Controls sophisticate the managerial objectives to be carried out in an orderly and efficient manner. Well, design controls help in detecting and preventing errors and fraud at their early stages thus ensures accuracy and completeness of financial statement and also safeguarding misappropriation of the company’ s assets. Internal controls also reduce the level of substantive test to be carried by the auditor hence reduces the time and cost of auditing. Responsibility of internal control It is the responsibility management's to ensure that controls are appropriate design and are functional.
Management is responsible for delegation of internal controls and they ensure that delegates adhere to them properly documented and maintained internal controls. Employees have some responsibility for enhancing the functional effectiveness of the internal control system. Internal controls are economical if a frequent review is carried out to augment the default in its effectiveness in ensuring that the organization operates according to the procedures and policies provided by the management. Management should appoint an internal audit team that oversees the organizational compliance with the set objectives.
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