To see internal controls in action, look around you. When you go to the store, see what types of internal controls you can identify. At your place of work see if you can identify internal controls that might be in place. After checking out some different places, come up with two internal controls you have observed. It can be at your place of business or when you are a customer (and they don't have to be from the same place). Describe each of the internal controls and identify which assets these internal controls are safeguarding. Second, find an example of a poor internal control or an example of a situation where an internal control should be implemented. Describe the situation and tell how you would either improve the internal control or implement an internal control if one is lacking.
The examples I have observed are from my work place and from the store:
-At my workplace, I process the invoice for payment and then through a system hierarchy , it goes to my manager for approval. If the invoice exceeds a certain amount, it goes to the senior manager. Thus, my work is checked and the maker-checker concept required in internal control exists.This internal control is safeguarding the financial assets ie, cash or bank balance of the company.
-At the store, after making a purchase, the assigned person at the door checks the items purchased in accordance with the bill to ensure that no item is embezzeled. After ensuring the same, he/she stamps the bill.This internal control safeguards the inventory of the store.
An example of a poor internal control is mentioned below:
At my workplace, the invoices are received at the vendor helpdesk and distributed to the respective employees to process. However, no record is maintained for the invoices received. This could result in the invoices being lost or misplaced and delay in payments.
A remedy for this would be to develop the system where invoices are scanned upon receipt and then distributed to employees so that an electronic trail is maintained.
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