Accounting Assignment Paper on Internal Controls

Internal Controls

 The development and documentation assists in creating a relevant understanding of internal controls over financial reporting. Under the ERISA, the fiduciary responsibilities seek to provide proper administration functions that include maintenance of the financial books and records for planning. Internal controls assist in identifying the errors and frauds that establish safeguards. Effective internal controls reduce the risks of asset loss, and ensuring effective plan information. They ensnares that information in the financial statements are reliable, complete and accurate. In addition, it further enforces compliance with the laws and regulations in the organization. This matches the achievement of financial reporting objectives to evaluate reasonable assurance (Ge & McVay, 2005). Most importantly, the installation of effective internal controls ensures minimization of opportunities for frauds. This discourages frauds and promotes the accomplishment of their objectives. In addition, an internal control plays detective roles in the identification of errors and frauds over the financial reporting processes (International Federal of Accountants, 2012).

In financial reporting, auditors are required to assess the effectiveness of internal controls. In assessing the design for effectiveness of internal controls, the auditor needs to consider the policies, procedures put in place by management in risk mitigation, and the control environment in which the entity operates as well as the communication frameworks that facilitates information flow to organization employees concerning their duties. The auditor needs to understand documents of the internal controls placed by management proper understanding of the internal controls enables the audit team to identify policies and requirements of the management (Frederick, 2012). The auditor needs to exercise oversight over management monitoring levels to employees in risk mitigation.

References

Frederick, D. M. (2012). Auditors’ representation and retrieval of internal control knowledge. Accounting Review, 240-258.

Ge, W., &McVay, S. (2005). The disclosure of material weaknesses in internal control after the Sarbanes-Oxley Act. Accounting Horizons, 19(3), 137-158.

International Federal of Accountants (2012). Evaluating and improving internal control in organizations. Final Pronouncement June 2012. Retrieved from: http://www.ifac.org/sites/default/files/publications/files/Evaluating%20and%20Improving%20Internal%20Control%20in%20Organizations%20-%20updated%207.23.12.pdf