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2. internal control

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  • Develop a schedule at thebeginning of eachday and theninspectthework at theend of thedaytoverifythatitwascompletedaccordingtoqualitystandards.Surpriseinspectionsbyarrival at siteonrandom times toverifythattheteamisworkingaccordingtoschedule.You can askemployeestoclock in and clockout at thebeginning and ending of work.You can asktoreturnvehicles and equipment at theend of thedayto a central locationtopreventunathorized use.You can keep a log of odometerreadings.You can billcustomersafteryouhaveinspectedthework.

2. internal control 2. internal control Presentation Transcript

  • INTERNAL CONTROLS
    Análisis de Costos
    Maestría en Administración
  • Internal Controls
    Contents
    1
    Issues you would face
    2
    Internal Control Concept
    3
    Objectives & Elements
    4
    Real World
  • Internal Controls
    Issues you would Face
    Some of the issues you would face as a manager in controlling the operation of a business are:
    • Serviceorproductmustbeprovidedon time.
    • Qualitymustmeetcustomerexpectations.
    • Employeesmustprovideworkforthehoursthey are paid.
    • Workequipmentshouldbeusedforbusinesspurposesonly.
    • Vehiclesshouldbeusedforbusinesspurposesonly.
    • Customersmustbebilled and billscollectedforservicesredered.
    Howwouldyouadresssome of theseissues?
  • Internal Controls
    Concept
    Internal Controls are the policies and procedures that protect assets from misuse, ensures that business information is accurate, and ensures that laws and regulations are being followed.
    Business use internalcontrolsto guide theiroperations and prevent abuses of theirsystems.
  • Internal Control Objectives
    Internal Controls
    “Objectives"
    Assets are safeguard and usedforbusinesspurposesonly
    Assets Safeguard
    Business informationisaccurate
    Employeescomplywithlaws and regulations.
    Laws & Regulations Compliance
    Accurate Information
    Control Environment
    Information & Communication
    “Elements"
    Risk Assessment
    Monitoring
    Control Procedures
  • Internal Control Elements
    Internal Controls
    Control Threats
    Control Environment
    Risk Assessment
    Control Procedures
    Monitoring
    Information & Communication
    Management
  • Elements of Internal Control
    Internal Controls
    1.Control environment
    2. Risk assessment
    3. Control procedures
    4. Monitoring
    5. Information and communication
  • Control Environment
    Internal Controls
    Management philosophy and operating style influences the control environment.
  • Elements of Internal Control
    Internal Controls
    1. Control environment
    2. Risk assessment
    3. Control procedures
    4. Monitoring
    5. Information and communication
  • RiskAssessment
    Internal Controls
    Once risks are identified, they can be analyzed to estimate their significance, to assess their likelihood of occurring, and to determine actions that will minimize them.
  • Elements of Internal Control
    Internal Controls
    1. Control environment
    2. Risk assessment
    3. Control procedures
    4. Monitoring
    5. Information and communication
  • Control Procedures
    Internal Controls
    • Competent Personnel
    • Rotating Duties
    • Mandatory Vacations
    • Separating Responsibilities for Related Operations, Custody of Assets, and Accounting (Segregation of Duties)
    • Proofs and Security Measures
  • Internal Controls
    Accounting
    Paying Supplies
    Independentcheck
    Independentcheck
    Process
    Operations
    Custody of Assets
    Independentcheck
    Purchasing of Supplies
    Receiving Supplies
    Segregation of Duties
  • Segregation of Duties
    Internal Controls
    Otherwise, the following abuses are possible:
    Orders may be placed on the basis of friendship with a supplier, rather than on price, quality, and other objective factors.
    The quantity and quality of supplies received may not be verified, thus causing payment for supplies not received or poor-quality supplies.
    Supplies may be stolen by the employee.
    4. The validity and accuracy of invoices may be verified carelessly.
  • Elements of Internal Control
    Internal Controls
    1. Control environment
    2. Risk assessment
    3. Control procedures
    4. Monitoring
    5. Information and communication
  • Internal Controls
    Clues to Potential Problems
    Warning Signs
    With regard to people
    From the accounting system
    1
    2
    Missing documents or gaps in transaction numbers (Could mean documents are being used for fraudulent transactions).
    Anunusualincrease in customerrefunds (refundsmaybephony)
    Differencesbetweendaily cash receipts and bankdeposits (could mean receipts are pocketedbeforebeingdeposited).
    Suden increase in slowpayments (employeemaybepocketingthepayment).
    Backlog in recordingtransactions (possiblyanattempttodelaydetection of fraud).
    Abrupt change in lifestyle (without winning the lottery).
    Close social relationshipwithsuppliers.
    Refusingtotake a vacation.
    Frequentborrowingfromotheremployees.
    Excessive use of alcohol ordrugs.
  • Internal Controls
    A 1996 surveybyKPMG, aninternationalaccountingfirm, identifiedexpense accountsmanipulation, receivingpaymentsfromsuppliersforfavorable purchasetreatment(kickbacks), purchasefor personal use, and misappropriation of cash as themosttypicalmethods of employeefraud. Basedon a 1995 surveybyAssociation of FraudExaminers, annualfraudlosses are estimatedtobe $400 billion in theUnitedStates, whichfortheaverageorganizationwouldbe 6% of revenuesor $9 per day per employee.
    An accounting clerk for the Grant County (Washington) Alcoholism Program was in charge of collecting money, making deposits, and keeping the records. While the clerk was away on maternity leave, the replacement clerk discovered a fraud: $17,800 in fees had been collected but had been hidden for personal gain.
    REAL WORLD
  • An employee of J.C Penney Co. was convicted of taking $1 million in bribes and kickbacks from suppliers in exchange for information about competitors´ bids. One of the prosecuting attorneys told the court. “This case will be discussed in corporate boardrooms… The message ought to be sent out that there´s a consequence to corporate fraud.”
    REAL WORLD
    Internal Controls
    In one of thelargestfraudsevercommittedagainsta university, a formerfinancialaidofficerforNew York University, waschargedwithstealing $4.1M fromthestate of New York. Theaidofficerallegedlyfalsifiedover a thousandtuitionassistancecheckstostudentswhowerenotentitledtoreceiveaid and whodidnotknowaboutthechecks. Theaidofficerdepositedtheboguschecksfor personal use. Theinitialevidence of thefraudwastheofficerspending $780K onexpensivejewelry.
  • Questions?
    Análisis de Costos
    Maestría en Administración