Internal Controls

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Internal Control System

Joseph Johnson

Internal Control Systems ACC/544 (course)

June 12, 2012


This report will question the need for an internal control system. With this report I will justify the need for the system when controls are in place with insurance and portfolio approaches.

An internal control system is important to companies. Most businesses use the insurance and portfolio approaches to manage the risks that the business has within the company although other company’s use an internal control system. The following brief will describe each approach and what the benefits would be if they would use an internal control system.

Current Approaches

There are two approaches, as mentioned earlier, that are used with controls to prevent risks from happening within the company. These two approaches are insurance and portfolio approaches. The first approach is an insurance approach that protects the company’s investment. When a company purchases insurance it is used to protect them from a loss that may occur. Insurance is considered more of a financing tool instead of a management tool. This approach keeps the impact of the losses instead of protecting assets from the losses that come up. The portfolio approach is more structured because it provides context and helps with decision making. When using a portfolio approach it minimizes a risk while improving the investment of the company. This does not protect the investment from risk but improves the decision- making to improve the risks.

Internal Control System

An internal control system is made up of policies and procedures that will protect an organization’s assets. When using internal controls it puts reliability of the financial data on an organization. It improves the operations of an organization and follows the laws and regulations like those in the Sarbanes-Oxley Act of 2002. There are five control activities that are the most...