Loss Prevention Policies
What are the benefits of a comprehensive control program? If you were advising this corporation, what would be the specific benefits for them?
A comprehensive control system helps the organization departments achieve the set objective within a given time period and as per the scheduled format. All transactions will be timely with those in power (authorization) and recording of all information will also be achieved. Correct accounts will be keyed in the appropriate accounts and in the specified financial period. This will in turn facilitate efficiency and effectiveness in the preparation of financial statements. Internal control system facilitates authorized and legal access to the information relating to assets and accessibility to records existing in terms of real assets.
Internal controls will enable the auditors assess the quality of the accounting office in relation to its function in the firm. It will also help in detection of fraud and error in this department of the accounting. Proper and reliable audit procedure will therefore be formulated in order to bring out transparency in the entire process as it ascertains the systems and the internal controls of the firm (Solomon, 2007).
What would be the procedures that should be considered for detective controls, including independent checks and a system for documents and records?
The determination of the appropriate audit method to be used in a firm assists in the accomplishment of a comprehensive plan determining the scope of the firm. Ascertaining of the relevant system and control of the whole firm is useful in the process of determining the accounting system and control of the whole firm. The documentation of the relevant systems and control of the firm for the provision of records that is useful in the evaluation of the firm’s activities (Chenok & Newcomen Society of the United States, 1988). The confirmation of the operation of all the firm’s systems and control helps in scrutinizing of the recorded systems and control regarding the firm.
The evaluation of the operation of the system and control of the firm that gives a critical review of effectiveness of the systems, controls and their reliance upon it while auditing the firm. For effectiveness, the controls are selected and tests performed on the reliability in its functioning. If the controls are ineffective in their duties, they are submitted to the interim management through a letter regarding its ineffectiveness. For the firm to attain audit evidence required regarding records of the underlying account balances, it selects and performs substantive procedures that aids in determining whether it is effective or ineffective. If the result indicates effectiveness, the firm selects and performs restricted substantive procedures on the auditing process before the final review stage.
The final review carries out a critical review of the financial statements and also makes any amendments required before making conclusion. The report is then forwarded to the members containing the firm’s final opinion regarding the financial statements of the firm within the period. The auditors express freely their findings on the firm’s accounts on the report given to the management. In case of ineffectiveness, the auditors may write a letter to the management which is non- statutory end product of the auditing process. It may make further suggestions for improvements in the systems and place on record specific pints in connection with the audited accounts of the firm (Eun & Resnick, 2007).
Discuss the possibility of a fraud hotline as part of your program. How can a hotline be implemented as a tool for preventing and detecting fraud?
Financial fraud has of recent raised concerns of many particularly in a computerized environment as it forms a central feature of financial scandals in most organizations. The increasing rates of sophisticated fraudsters have created sleepless nights for the management and auditors. There are cases of fraud in computer environment and has risen as time goes by. This has led to the creation of fraud hotlines to detect in the event of such.
Fraudsters have come up with ways of extortion hence invention of the fraud hotlines. This control program is to help the auditor in the following ways. There should be a plan and procedure which gives an outline on auditing process. The control program should help in risk assessment hence helping in audit designing. There should be detection of any nature or event that fraud may occur at any time.
The control program should be able to detect misstatements which are material to financial statements. The system should be able to relate the event and the possible effect on the financial statement (Brooks & Dunn , 2009). Fundamental judgment should be done upon completion of the test. The most common cases of fraud have of recent been reported in the Enron firm in the United States and the Parmalat dairy firm in Italy where managers manipulated their accounts to indicate more profits yet they were making loses in their operations. The whole globe was deceived that the companies were making abnormal profits yet they were using loans acquired from international banks and of the investors. They were able to open up more branches across the world before the investigation agents discovered that there was fraud in the accounting system yet the auditors had not discovered while analyzing their financial statements.
Provide an overview of steps that you would take for a successful implementation if the corporation wanted this option
The connection of the past occurrences in most firms gives either give doubt or faith in the management of the organization. The size of the management will determine the points at which hotlines should be implemented in the auditing process of the firm. The actual financial reporting factors bring pressure in the business. In implementing the control hotlines, pressures felt in the accounting department should be considered while implementing the plan. The control environment within the organization should be assessed so as to detect the strong and the weak areas of the firm. This will aid in noticing what areas to put in more emphasis. The nature of transaction is also vital since unusual transactions are questioned. i.e. so many transactions taking place at the closing date of the financial year and balances carried down/forward are normally not clearly highlighted as most of the firms use this trick in giving false information to the auditors as it do not bring out a true overview of the firm’s assets and all the transactions within the trading cycle. In any way the whole process of detecting fraud and errors should not only be left to auditors since this is a responsibility of all the personnel’s in a firm. Suspicion of fraud should be addressed by anyone within the organization (Gilbertson & Lehman, 2008).
Brooks, L, J & Dunn , P. (2009). Business & Professional Ethics for Directors, Executives & Accountants. Stamford: Cengage Learning.
Chenok, P, & Newcomen Society of the United States. (1988). AICPA: serving America's business and financial needs. US: Newcomen Society of the United States.
Eun, C, S & Resnick, B. (2007). International financial management. University of California: McGraw-Hill/Irwin.
Gilbertson, C, & Lehman, M. (2008). Fundamentals of Accounting. Stamford: Cengage Learning.
Solomon, J. (2007).Corporate governance and accountability. Hoboken, NJ: John Wiley and Sons.