Question

Inaccurate and unreliable information can spell financial disaster for businesses and persons who use this information for decision-making purposes. From the standpoint of a business, accurate and reliable information is necessary in order for a potential investor to have when they are considering investing with the company. If the information is not accurate and reliable, this will potentially harm the investor. Inaccurate financial information may be due to the incompetence of the accountant who prepared the financial statements or due to dishonesty and an attempt to conceal information. Internal control is the system of policies and procedures that a company puts in place to provide reasonable assurances that: The company’s operations are effective and efficient The company’s financial reporting is reliable, and The company is complying with applicable laws and regulations

1. In your first post, respond to the following questions:

a. How can a business ensure that the employee who is preparing the financial statements is capable of doing so accurately?

b. What internal controls might you recommend to the company to be sure that an attempt to conceal information has not occurred?

c. On a personal note, how do you minimize risk for errors in your work? This may include your schoolwork or the work that you do for your employer.

Answer 1

a. To ensure that the employee responsible for preparing the financial statements is doing so accurately, the human resources team should hire people of high professional competence who are qualified. Further, a periodic review of all employees' work should be done by seniors to ensure performance efficiency.

b. The following internal controls will help to detect concealment of information:

- The work of one employee should be automatically checked by the other.

- Appropriate and adequate documentation for all entries put in the system should be done.

- The accounting system should not allow accounting entries to be put in after cut off date.

c. On a personal note, I prepare a checklist of tasks to be accomplished to minimize the errors in my work. Further, I set targets for the month and finish my work prior to deadlines to avoid errors due to last minute hassle.