Internal Control & Risk Evaluation Kudler

Internal Control and Risk Evaluation

ACC/542

Aug 13, 2012

Internal Control and Risk Evaluation

There are four objectives when it comes to implementing an internal control system: to safeguard assets, to check the accuracy and reliability of accounting data, to promote operational efficiency, and to encourage adherence to prescribed managerial policies (Bagranoff, 2008). Management at Kudler Fine Foods has reviewed the flowcharts for the data processing of payroll, accounts payable, accounts receivable, and inventory. I will address the risks of these systems, the internal controls that can mitigate those risks and how to apply them, and describe other controls that can be implemented to safeguard assets and data.

Risks in the Systems

Risks can come from both external and internal sources. The purpose of risk assessment is to identify areas that require control procedures to keep company assets safe. Company assets can include cash, inventory items, and information.

“The greatest internal threat to an e-commerce website is poor management” (Doe, 2012). While Kudler does not utilize e-commerce at this time, they plan on implementing an e-commerce site in the near future, and poor management can put the AIS at risk as well. Fraud by employees is a major concern. Fraudulent transactions can be entered into the system to divert assets to themselves or others. Employees can gather information, such as credit card numbers, for personal use. The business process can be a risk If there is a flaw in how data is entered, processed by the system, or communicated to various users. Management basing decisions on data outputs that are not accurate because of poor data inputs or problems in the processing of data, could be disastrous for the company.

An outside threat, that mirrors an interior threat, is fraud. The system runs the risk of hacking by individuals looking for credit card numbers and other...