Memo

To:

From: 

Date: 

Subject: Accounting Internal Controls

Accounting internal control refers to the procedure of assuring accomplishment of the organizational objectives in operational efficiency as well as effectiveness, dependable financial communication, law, rules and guidelines compliance (Bragg, 2009). The extensive concept of internal accounting control incorporates all that is engaged in the control of the organizational risks. This is the path via which the organization’s resources are distributed, regulated and measured. Internal control of accounting plays a crucial role in the general detecting and the prevention of fraud occurrence as well as the protection of the company’s resources which are both intangible such as corporate image and intellectual property the physical ones like machines and human resources. The objectives of internal control at the organizational level are mainly associated to the dependability of financial communication, acquiring timely responses on the success of the strategic or operational goals as well as the compliance with rules, guidelines and respective laws (Bragg, 2009). On the other hand at the transaction specified level, internal control mainly deals with the acquired actions in the achievement of particular goals. Internal control procedures result in the reduction of variation which results to having predictable results (Bragg, 2009).

Adequacy of Five Internal Controls

Internal controls are guidelines and procedures that are set in enhancing continuous accounting systems dependability and they are created in the preventing the occurrence of fraud. To start with, duties separation is one of the internal control which incorporates the splitting of responsibilities, reporting, auditing, deports as well as book records maintenance (Bragg, 2009). The more that the respective duties are divided the lower the chances that are held by any staff in committing of fraudulent operations. The other one refers to controls access to the differing accounting systems through the creation of lockouts, electronic admission logs, and passwords. This strategy is essential and effective in preventing the unauthorized users to away from the system while offering the opportunity for conducting the system’s usage audit in the establishment of errors or weaknesses (Bragg, 2009).

Physical audits normally incorporate the hand counting of cash as well as other physical properties that are tracked within the accounting system like materials and portfolio (Macintosh & Quattrone, 2009). This system is essential given that physical counting can reveal the hidden weaknesses in the balance of account while sales cash account can be done at every time to ensure accountability. Documentation involves the utilization of standardized documents for the financial exchanges which are essential in the maintenance of consistency in keeping records (Macintosh & Quattrone, 2009). Accounting reconciliation, on the other hand, can help in creating and sustaining accounting systems balances in those accounts possessed by others like suppliers and banks.

Organization’s Types of Vulnerabilities to Theft and Fraud

McDonalds Company is vulnerable to the occurrence of fraud for one because its duties are not highly separated. When duties are all provided to a small number of individuals this implies that the potential of conducting fraudulent operations is high (Macintosh & Quattrone, 2009). The corporation should, therefore, focus on further duties separation. The control of cash control should additionally be limited and only a few trusted employees who are accountable for any loss that is permitted to handle the finances. Also, the company fails to conduct proper documentation of the accounts possessed by suppliers and other stakeholders in assessing the accuracy and dependability of resources. The inadequate and the missing controls can best be fixed by the implementation of further duties separation, standardized documentation and access control to limit the number of those having access to financial records, resources, and cash. 

 

 

 

 

 

 

 

References

Bragg, S. M. (2009). Accounting control best practices. Hoboken, N.J: Wiley.

Macintosh, N. B., & Quattrone, P. (2009). Management accounting and control systems: An organizational and sociological approach. Hoboken, N.J: Wiley.