Accounting205 Ip3 Internal Control System
Miranda Misercola
AIU Online
ACCT205/Professor Francis Hoban
Discussion Board 3
May 19,2013
Abstract This paper will describe the limitations of the internal control system and also give the reader three examples of such limitations. Internal control procedures will be thoroughly discussed and how the procedures are actually executed. Signs and symptoms of an underdeveloped internal control system and the impact of a missing journal entry on a financial statement will be further reviewed.
With everything, there can be bad or there can be good. In accounting, however, there has to be a consistent control system in order to make sure that the end result is accurate and the initial intent is attained. There is no room for human error and because of this there needs to be a happy medium between bad and good. Unfortunately, this is not always as easy said and done. In order to diminish errors and abnormalities, management should not use a quick-fix method.
Costs may lie here and limit the company from its full potential.
Management should encourage their employees by implementing a specific control.
However, the cost to establish an internal control system in order for it to be effective is limited by the benefit of the control. For example, if the company offers each employee one bonus a month, that would most likely hurt revenue. On the other hand, if management offers other incentives such as vacation time and pay, medical coverage, or even a raise every six months or so; this wouldn’t hurt the company’s control costs and would allow the employees to be stress and fatigue free. Nevertheless, sometimes even if there are no-out-of-pocket costs for the company, creating an effective internal control system may not always be the first answer.
Occasionally, the company will have to down-size their staff, which limits productivity.
Business owners use accounting to record and report the business’s financial data.
AIU Online
ACCT205/Professor Francis Hoban
Discussion Board 3
May 19,2013
Abstract This paper will describe the limitations of the internal control system and also give the reader three examples of such limitations. Internal control procedures will be thoroughly discussed and how the procedures are actually executed. Signs and symptoms of an underdeveloped internal control system and the impact of a missing journal entry on a financial statement will be further reviewed.
With everything, there can be bad or there can be good. In accounting, however, there has to be a consistent control system in order to make sure that the end result is accurate and the initial intent is attained. There is no room for human error and because of this there needs to be a happy medium between bad and good. Unfortunately, this is not always as easy said and done. In order to diminish errors and abnormalities, management should not use a quick-fix method.
Costs may lie here and limit the company from its full potential.
Management should encourage their employees by implementing a specific control.
However, the cost to establish an internal control system in order for it to be effective is limited by the benefit of the control. For example, if the company offers each employee one bonus a month, that would most likely hurt revenue. On the other hand, if management offers other incentives such as vacation time and pay, medical coverage, or even a raise every six months or so; this wouldn’t hurt the company’s control costs and would allow the employees to be stress and fatigue free. Nevertheless, sometimes even if there are no-out-of-pocket costs for the company, creating an effective internal control system may not always be the first answer.
Occasionally, the company will have to down-size their staff, which limits productivity.
Business owners use accounting to record and report the business’s financial data.
References: Duggan, Tara. (2012). Signs & Symptoms of a Lack of Internal Control of a Business. Retrieved from http://smallbusiness.chron.com/signs-symptoms-lack-internal-control-business-51658.html Vitez, Osmond. (2012). Demand media. Accounting & Internal Control Procedures. Retrieved from http://smallbusiness.chron.com/accounting-internal-control-procedures-3795.html