The Role of Effective Internal Control Procedures

The Committee went on to enumerate a number of actions that they regarded to become crucial for an highly effective internal control function within an organization. These crucial actions were as follows: (1) the directors of an business must report over a effectiveness of their method of internal control, and this report needs to be included in the organization's annual report; and (2) organizations need to develop a set of criteria for assessing the effectiveness of their internal manage functions (Committee on a Financial Aspects of Corporate Governance, 1992, Section 5.16). Additionally, being effective, the reports prepared and the records maintained by an internal auditing functionality ought to be relevant, reliable, accessible, complete, accurate, and timely (Chartered Institute of Management Accountants, 1999).

Chapman (1995) noted how the role with the internal auditor has been changed dramatically by pc processing and specifically by personal computer software. These tools facilitate the work from the internal auditor in meeting the new responsibilities accruing towards the internal audit function as a consequence of changes during the technique to corporate governance as well as the needs of SAS 300. Both the Cadbury Report and SAS 300 are parts of an international reform from the thought of corporate governance (Norburn, Boyd, Fox, & Muth, 2000; Monks, & Minow, 1995). The Business for Economic Cooperation and Devel.

Risk factors regarding misstatements arising from fraudulent financial reporting are categorized as management characteristics and influence more than the manage environment, marketplace conditions, and "operating characteristics and financial stability" (McConnell & Banks, 1997, p. 24). Risk causes concerning misappropriation of assets are categorized as the "susceptibility of assets to misappropriation and lack of controls. The extent with the auditor's consideration from the latter is influenced by the existence of risk causes inside the former" (McConnell & Banks, 1997, p. 24). The specific risks that needs to be assessed by the external auditor with respect to fraudulent financial reporting are as follows (McConnell & Banks, 1997).

 

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