Free Internal Control Essay Sample
Internal control refers to the procedure that is premeditated, upheld as well as executed by the governing body in an organization such that it provides a sensible guarantee of achieving the entity’s objectives. It should take into consideration the consistency of the economic reporting competence, effectiveness of procedures, fortification of the possessions as well as conformity with appropriate laws and regulations. The setting of the objectives as well as expectations is the key for internal control, which exists if the state of affairs is kept in check.
Internal control has to be exercised for a company to run efficiently and compete effectively in the existing market. Thus everyone in the company has a role to play in the internal control. The LJB Company has to start by laying down specific rules and regulations. For a company to be more effective, it is required that it delegates its work appropriately to it workers. The internal control requires a company to audit and have a regular accounting report so as to reduce fraud. Company is required to set rules as well as regulations that will be used to govern the company’s employees.
It is also important for the company to have a better chain of power as well as effective procedures that govern its activities. It is required that a company has a business continuity program that would enable a continuation of business as usual in case of any unintended interruption of the day to day program. The company’s employees should be aware of and follow the set ethical and organizational values, upholding them at all times through their own performance as well as decision making. The internal control requires that if a company goes public, it has to audit as well as present its financial reports to the officers in charge. The company should be always ready for auditing by the financial audit officers.
The fact that the company values its employees is an important aspect that motivates the employees. The employees understand their task and position in the company and hence, perform their duties more effectively. Getting one paid in time encourages one to perform his work even better. The company ensures that the checks are available on pay day; it also provides petty cash for its employees without much of procedures. It would be wise if the president does not approve the purchase of the indelible ink machine to print their checks. Instead, the president should vote for a change in the accounts system; for instance, the one in which the employees money will be wired directly to their bank accounts. This will make the system more effective as the employee will just have to go and confirm if the money has been transferred or not.
The LJB president has to improve the existing internal control system, especially the company’s accounting system and the internal control’s acts. The company has one employee who serves as the accountant, treasurer as well as controller; this is not acceptable as it increases the chances of fraud. The president of the company ought to employ a treasurer and a controller so that each employee will deal with a specified area of expertise, thus making work easier and more efficient.
The fact that the employees have a direct access to the petty cash can have negative outcomes, as some of the employees may misuse this access by using the funds inappropriately. The employee’s payment mode is done in an old fashioned way. It would be more appropriate if the system will be changed. Most of the companies are no longer using the checks as a mode of payment; instead, they are transferring their employees’ salaries directly to their personal accounts. The president should also form a human resource department that will be responsible for recruiting new employees in the firm; this will enable the firm to avoid any unpleasant events with its employees. The department should check and monitor the conduct of the individual both before as well as after employment.