Limitations of Internal Control System in Auditing - Essay Example

The other limitations include the aspect that designing as well as establishing efficient internal controls can be quite a difficult task due to lack of knowledge of staff to operate such systems. Internal control systems might not always reflect altered operating conditions (Gupta, 100-200).

The internal control system has certain procedures which are illustrated with the help of two examples. Firstly, the internal control system should be served with proper Information Technologies (IT). IT helps the auditors to control the account-related entries correctly and reduces the risk of wrong or omitted entries. This is because IT assists to store the data correctly and the stored data can be simultaneously cross-checked, consequently allowing to rectify the faults and can recognize the missing entry. This internal control process can be implemented by ABC Company to its auditing department by providing IT-related requirements such as computers and through the proper mode of communication. Computers will help to store the transactions related to accounts and the communication process will assist the auditors to collect all information and documents related to accounts within its premises (Sai, “Internal Control and Auditing In IT Environment”).

The other example of internal control procedures is that handed-over duties and liabilities should be familiar and communicated to employees properly by the company’s higher level officials. This procedure helps the management and the subordinates to plan and to work out the strategies sufficiently by which the objective of the specified task can be achieved efficiently. This procedure of internal control can be implemented by ABC Company through proper recruiting of employees as well as employees should be handed over with the task in which they are familiar (Defense Contract Audit Agency, “Audit of Policies, Procedures, and Internal Controls Relative to Accounting and Management Systems”).

The lack of internal control leads to certain difficulties that a company meets during its business process. The symptoms comprise the fact that it leads to financial problems in the business which results in difficulty in running a project. Due to financial problems, companies may not be able to expand their projects further. Lack of internal control can also affect a company significantly to adapt appropriately to the changes in the global economic scenario (National Science Foundation, “Possible Grant Fraud Indicators”).