No processes in place to evaluate employees ethical standards Tone at the top is minimal, with Doug and Phil appearing to have integrity, they work hard and stay late and the business is growing via “word of mouth” Lack of formally reported goals and values
However, “open door policy” is a good supporting communication line Sales people being paid on commission and negotiating special prices needs ethical values to keep employees ethical Compensating Controls:
A lack of accountability enforcement from principle 5 could contribute to a lack of ethical standards being in place and adhered to. A lack of structure in management and BOD oversight could contribute to the lack of code of conduct in place A Major Deficiency: No
Exercises Oversight Responsibility
Rating: 3
Present: Yes
Functioning: Yes
internal control deficiency description:
There are no board members independent from management (only owners and wives) Very informal and weak oversight
Only one scheduled meeting a year
Board members, Doug & Phil, lack formal accounting training to have relevant expertise and oversight into certain practices While it is a small business so large board is a future possibility, there appears to be a weak oversight of internal controls from the BOD standpoint Compensating Controls:
The Essay on The Audit Report and Internal Control Evaluation
Team D Auditing has been evaluating the evidence presented by Apollo Shoes. The audit team has developed an audit report in response to the audit and has also provided a description of the evidence, a description of the account sampling and testing procedures used, and has also given a brief description of the value of an audit report. This report is only to reflect Team D’s opinion regarding ...
A lack of segmentation between management structure and BOD oversight No formal competence or accounting training for Board Members could lead to lack of effective and knowledgeable oversight A Major Deficiency: No
Establishes Structure, Authority, and Responsibility
Rating: 4
Present: Yes
Functioning: Yes
Internal control deficiency description:
Smaller business so lack of limits on authority and responsibility Overlap in duties of employees
Mr. Day has many different and conflicting responsibilities
He develops the accounting software
He also reevaluates the software
He approves job commitments
Lack of segregation of duties- Dr. Day is given all accounting duties No budgets prepared
Lack of protection for accounting records
However, owners and Mr. Day are highly involved, and the engagement of CPA’s for an audit shows responsibility. Compensating Controls:
A lack of true BOD oversight to help establish authority and structure A lack of ethical values can reflect in a lack of consideration of all structures of the entity A Major Deficiency: No
Demonstrates Commitment to Competence
Rating: 6
Present: Yes
Functioning: Yes
Internal control deficiency description:
Office employees experience confusion regarding their job duties and responsibilities No formal job descriptions have been developed
However, there is formal training and little employee turnover “Open door policy” helps with retention and resolving issues Phil and Doug also address problems and shortcomings at monthly meetings Compensating Controls:
Having stronger responsibilities and structure established could help increase the commitment to competence. A Major Deficiency: No
Enforces Accountability
Rating: 3
Present: Yes
Functioning: No
Internal control deficiency description:
Management does not formally specify goals
The Term Paper on Lack of Responsibility Kills
When it comes to the battle between obesity among Americans and fast food chain companies, fast food falls hard for the one to blame. For many years, big food companies have been constantly under attack from health advocates and consumers for the contribution of growing waistlines, chronic diseases and lack of exercise in the United States. Of course, it is easy to blame fast food corporations ...
There are no set internal control objectives to achieve or monitor There are no performances measures of internal controls in place Compensating Controls:
A better BOD oversight would help with this accountability
Establishing more structure/ clear objectives
A Major Deficiency: No
Overall Assessment of Control Environment
Rating: 4
Overall, Easy Clean Co. appears to have a very minimal internal control environment. Although it is a small business, the lack of independent Board of Directors, combined with no Code of Conduct or clear company objectives make it hard for there to be accountability and true adherence to control guidelines. Phil, Doug, and Mr. Day control much of the company’s management roles, and the responsibilities in the accounting sector have a lack of segregation of duties. While there is strong work ethic and commitment to competence with low employee turnover, the employees aren’t aware of internal control objectives and being held responsible for certain duties. There is no enforcement or accountability simply because there is a lack of objectives and true role responsibility at every level of the company. Despite these deficiencies, there is a BOD and the management does realize the need for controls, which is shown through seeking out a CPA firm to audit them company.
