NCJ Number
66752
Date Published
1980
Length
659 pages
Annotation
THIS VOLUME COVERS BOTH THE CONCEPTUAL ASPECTS OF INTERNAL CONTROL TO REDUCE ORGANIZATIONS' EXPOSURE TO ACCOUNTING AND FINANCIAL LOSSES AND AN APPROACH TO CONDUCTING A REVIEW OF EXISTING CONTROL SYSTEMS.
Abstract
DESIGNED FOR MANAGEMENT PERSONNEL, AND INTERNAL AND INDEPENDENT AUDITORS, THE BOOK IS INTENDED TO ENABLE AN ORGANIZATION TO CREATE ITS OWN INTERNAL CONTROLS REVIEW AND EVALUATION PROGRAM. INTERNAL CONTROLS ARE OF TWO KINDS--ACCOUNTING AND ADMINISTRATIVE, THE FIRST DESIGNED TO BRING ABOUT ACCURATE AND SUITABLE RECORDING AND SUMMARIZATION OF AUTHORIZED FINANCIAL TRANSACTIONS AS A FRAUD DETECTION AND PREVENTION MEASURE AND THE SECOND DEVELOPED TO PROMOTE OPERATIONAL EFFICIENCY AND ENCOURAGE ADHERENCE TO MANAGEMENT POLICY. INTERNAL CONTROL IN A FINANCIAL AND ACCOUNTING RISK ENVIRONMENT IS EXAMINED, WITH DISCUSSION FOCUSING ON MANAGEMENT'S RESPONSIBILITY FOR INTERNAL ACCOUNTING CONTROL UNDER THE FOREIGN CORRUPT PRACTICES ACT, THE REDUCTION OF RISKS THROUGH CONTROLS, AND DEFINITIONS AND OBJECTIVES OF INTERNAL CONTROL. CONTROL TASKS ARE ALSO DISCUSSED, PARTICULARLY IN A COMPUTER ENVIRONMENT. A CONDITIONS OF CONTROL QUESTIONNAIRE IS INCLUDED. A FRAMEWORK FOR EVALUATING INTERNAL CONTROL IS PRESENTED, WITH PROVISIONS FOR RANKING CONTROL WEAKNESSES, PRELIMINARY EVALUATION OF THE SIGNIFICANCE OF POTENTIAL CONTROL WEAKNESSES, LIMITATIONS OF INTERNAL CONTROL EVALUATIONS, AND POLICIES AND PROCEDURES FOR ORGANIZING AND IMPLEMENTING AN INTERNAL CONTROL EVALUATION. THE PRELIMINARY PHASE FOR EVALUATING THE SYSTEM, INVOLVING UNDERSTANDING THE SYSTEM, RECORDING (FLOWCHARTING) THE SYSTEM, AND CONFIRMING THE UNDERSTANDING THROUGH TRANSACTION REVIEW IS DETAILED. A DESCRIPTION OF THE QUESTIONNAIRE AND TESTING PHASE OF THE EVALUATION FOLLOWS, WITH PROVISIONS FOR FORMATING THE INTERNAL CONTROL QUESTIONNAIRE, APPLYING FUNCTIONAL TESTS AND OPERATIONAL REVIEWS, AND SELECTING ITEMS TO BE TESTED OR REVIEWED. INTERNAL CONTROLS IN THE PAYMENTS CYCLE ARE EVALUATED, AND CONTROL OBJECTIVES OF THE TIME CYCLE ARE DISCUSSED. THE INTERNAL CONTROL QUESTIONNAIRE AND ACCOMPANYING REFERENCE MANUAL (EXPLAINING THE QUESTIONS AND DESCRIBING THE EFFECTS OF ACCOUNTING CONTROL WEAKNESSES) ARE APPENDED. ALSO PROVIDED ARE FLOWCHART WORKSHEET FORMS, INSTRUCTIONS FOR DOCUMENTING FUNCTIONAL TESTS AND OPERATIONAL REVIEWS, AND SECURITIES AND EXCHANGE COMMISSION RELEASES. FOOTNOTES AND AN INDEX ARE INCLUDED. (WJR)