Comptronnix

inally, monitoring is the process (internal or external) to evaluate the performance of the internal control system over time.

At Comptronix various factors increased the control risk for the company. First, the loss of one of the major customers is a circumstance that increases control risk as management has an incentive to misstate earnings and other accounts to stay profitable. Second, the accounting system could be bypassed by management with factious manual entries. This increases control risk as it grants unlimited authority to top management for changing and manipulating accounts.

Also cash disbursements could be approved by management based solely on an invoice. Finally the computerized accounting system in the shipping department, which constitutes a good internal control device, could be accessed and manipulated by the controller. In summary management had too much authority to enter and change the electronic accounting systems of the company, while there were no double checks in place to verify and control manual changes in the system.

4. The board of directors, and its audit committee, can be an effective corporate governance mechanism

.a) Discuss the pros and cons of allowing inside directors to serve on the board. Describe typical responsibilities of audit committees.

Inside directors on the board can facilitate its effectiveness by establishing strong connections between the board and day to day business. However, inside directors can also comprise the independence of the board when it comes to personal interests. For example, the ability of the board to set bonuses that are tie