Question

Please write a case study about "Internal Control" This case study should tell a story using fictitious scenarios/roles and may be designed from different angles. Please feel free to choose one of the following three angles and write one paragraph with 150-300 words. Suggested angles: How would we execute internal control when we have cash receipts? • What about internal control in our cash payment process? • Why is internal control important to our business?

Answer 1

1.

Effective internal control reduces the risk of asset loss, and helps ensure that plan information is complete and accurate, financial statements are reliable, and the plan's operations are conducted in accordance with the provisions of applicable laws and regulations.

At the beginning of 2000’s major corporate and accounting scandals resulted in collapses of companies like Enron, WorldCom, Ahold and Parmalat. They shook investors’ confidence and resulted in the tightened law in the form of Sarbanes-Oxley Act of 2002 and many other regulations, recommendations, and legislation around the world. However, tightened regulations are not impermeable as the recent fraud cases such as following proves: ABB in South Korea of $100 million; Konecranes in one of its subsidiaries of 17 million € in 2015; alleged bribery cases of Caverion in Germany and of Shindler in China or internal audit scandal of Toshiba. Such cases result in damaged reputation, financial losses and loss of trust for the management of the company. In order to assure shareholders and to manage those risks, companies increased their interest in internal control and internal audit. “Internal Audit’s objectivity, perspective, and skills can assist stakeholders and provide valuable insight”. “Internal control is recognized as a key corporate governance mechanism and disclosure of information about internal control systems is viewed as a significant component in the process of restoring public trust in corporate probity in the wake of financial scandal.