Internal Control Weakness (Auditing) - Research Paper Example

Running Heading: Internal Control Weakness Internal Control Weakness Foot Locker INC. [Address] November 6, 2011 To: M. I. Supavizah From: [Your Name] Subject: To Report Internal Control Weakness in the Organization I am currently employed by your company, Foot Locker. And I am performing all my responsibilities effectively and efficiently. I am aware that the management of the organization is considerate about the internal control and internal audit. Apart from this, organizations is using Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework, in order to check and monitor the overall effectiveness of the internal control.

However, I would like to inform you about a serious internal control weakness in the organization. The information technology system used by the organization for the inventory management is not appropriate and efficient enough to control integrated process of inventory management in various outlets. In order to be able to generate accurate financial reports and results, it is important for the organization to manage the level of inventory all over the retail outlets in an efficient manner. This weakness in the information technology system will result in exposing it to different types of frauds and illegal activities.

Design of the information technology system is inadequate and hence the system is not able to provide complete, precise, and correct information about integrated inventory management which is required for the purpose of financial reporting. There are different financial and operational implications of this internal control weakness. Because of this inadequate and inefficient technology system, employees associated with the process of inventory management can manipulate the information and data for their own benefits.

This will result in damaging the overall reputation and profits of the organization. Apart from this organization will have to face several other issues because of the lack of proper inventory management. Organization places huge emphasis on the inventory management and it is essential to have an appropriate management information system which allows the organization to implement integrated inventory management. Along with this, inefficiency on part of the technology system will result in the generation of huge implications and costs associated with different issues of frauds and external audit.

Internal control is of high importance for the success and growth of any company. Internal audit and internal control is essential in order to control overall practices of the organization and avoid any possibility of fraud. There have been several cases of frauds due to lack of appropriate internal control system. Management should be able to identify important elements and factors, which should be controlled in order to ensure that the company is performing in acceptable manner and is reporting all relevant information and data in the financial statements.

Organizations which come up with well planned and well thought internal control and auditing strategies are able to improve the overall performance and lead the organization towards the path of success and growth (Moffett & Grant, 2011). At the same time it is important to acknowledge that almost all internal control strategies and systems are vulnerable and exposed to different risks. There are always some loopholes in the internal control system of every other organization. For this reason, it is required that organizations monitor and check their internal control process on routine basis and identify any changes which should be made (Soh & Martinov-Bennie, 2011).

In regard to the identified problem and increased importance of the appropriate internal control system, I will like to recommend to redesign and rebuild the management information system of the organization. New management information system should be able to provide information and data on the basis of integrated inventory management. Along with this the new management information system should be designed in such a way that only concerned and authorized persons are able to access and change the data and information.

This will result in decreasing the chances of any manipulation and fraud and in turn will strengthen the internal control system of the organization. REFERENCES Moffett, R., & Grant, G. (2011). Internal Controls and Fraud Prevention. Internal Auditing, 26(2), 3. Soh, D., & Martinov-Bennie, N. (2011). The internal audit function. Managerial Auditing Journal, 26(7), 605-622.