Internal Controls and Accounting Systems - Assignment Example

Internal Controls and Accounting Systems Name Date Course Task 1 Accounting play an important role in an organization as it furnishes the individuals and groups inside and outside the company with the financial information. The information can be used for the purposes of making decisions regarding the operations of the organization. Risks as well as uncertainties related to the finances can also be controlled in the presence of accounting information (Weygandt, et al., 2015). The nature of the accounting system is however important in ensuring that the required information is provided. Goodwin Veterinary Group (GVG) has put in place a software known as Quasar 50 accounts professional package. A total of 8 computers are also available at the accounting department of the company. A separate inventory control system has also been put in place for booking the good received in each of the branches. The payroll package that is utilized at the organization is a real time system that has been in use for about a year. The measures that have been put in place at the organization indicate that the company is utilizing an inventory accounting system. The inventory accounting systems mainly tracks the inventory levels as well as the activities related to the inventory. This ensures that the goods bought by the company are monitored through the accounting techniques (Weygandt, et al., 2015). The company has an IT policy to govern the use of the systems that has been put in place. However, most of the employees are not fully aware of the policies. The company mainly relies on the ledger book for recording the accounting details. The internal controls within the organization are not sufficient to meet its needs. The company has an officer in charge of monitoring the cash flows within the branches. This creates a challenge in terms of reconciling the information of the whole organization. Some of the important internal control tools such as the statement of profits and loss, financial position as well as the cashflow are not accurately provided by the personnel. This can be attributed to the accounting system that is in place at the company as well as the variations that exists at the different branches of the company. The decentralized system is in place at the company which means that each of the branches manages its own inventories although a report is sent to the headquarters. This type of organizational structure that is in place at the company has negative impacts on its ability to effectively monitor its accounting activities. It is for this reason that a lot of disparities exists. The system in place makes it difficult for checks to be made regarding the delivered goods. This is partly attributed to the policies as well as the relationship between the personnel at the company. The organization structure in place within an organization has a direct impact on accounting (Needles, et al, 2012). The internal controls within an organization play an integral role in determining the success of an organization. The presence of internal controls ensures that timely and accurate financial statements are provided. GVG has a poor internal control mechanism which directly contributes to the accounting problems that it is faced with. The company utilizes an integrated system to run the computers which have a common password. The presence of the same password in all the computers of the company exposes it to the risk of financial fraud by the employees or external stakeholders. The personnel in charge of the payroll however operate independently in order to avoid fraud in the payment of salaries and are also required to keep printed copies. This is one of the mechanism that the company has put in place to detect fraud. It is however not sufficient as there are no mechanism to detect fraud in the other areas of accounting. One of the potential areas of fraud at the company involves the decentralized system of purchasing the required supplies. The lack of proper procedures and policies in receiving the purchased goods also exposes the organization to fraud. This is despite the good relationship that it enjoys with the suppliers. Poor cashflow management practices at the company are of major concern and it may expose the company to losses. High levels of accuracy and proper reporting framework are required in accounting in order to detect and avoid any incidences of fraud (Needles, et al, 2012). The presence of a centralized accounting management software has the ability to solve the most of the challenges that the company is faced with. This is because the information will be available to all the accounting personnel as well as the managers and hence improving on the capacity of the organization to deal with the accounting problems. Task 2 The accounting systems ethics mainly revolve around reporting activities at the company. The personnel working at the financial department of the organization must maintain high standards of ethics at all times when performing their duties. This is considering that most of the financial data within an organization is highly confidential. The accuracy of information is one of the aspects of financial accounting ethics (Warren & Young, 2011). This is one of the problems that the organization is faced with. The personnel are prone to breach accounting ethics by entering information that is not accurate. This explains why some of the accounting information cannot be reconciled. The lack of a proper external audit is an issue that may contribute to the problems associated with the problems of ethics. An external auditor in most case has the ability of unearthing some of the financial misappropriation and unethical activities. The Generally Accepted Accounting Principles (GAAP) is vital in organization in promoting ethics. However the company is not applying the principles in its accounting practices and hence exposing it to fraud and unethical practices. The weak internal control also exposes the organization to ethical problems. One of the measures that the organization has put in place in terms of internal controls involves separating the functions within the departments. This is one of the recommended practices in terms of promoting ethics through internal controls (Warren & Young, 2011). However some of the personnel at the organizations are still in control of most of the financial activities. This is of major concern as such individuals are prone to committing unethical activities. Task 3 Sustainability in accounting is vital in ensuring that the activities of an organization are measured in accordance to their impacts. It is also useful in ensuring that the stakeholders are aware of the activities of the organization and how it influences the performance. Decisions can be made based on the information about sustainability. The main principles of sustainability in accounting revolve on the impacts the activities has on the society, environment and economic performance (Epstein & Buhovac, 2014). The company does not have a sustainability plan which may impact negative on its operations. There are no disclosure mechanisms in relation to the aspects of environment, economical and social factors. The company does not have policies related to the use of energy and how it affects its operations. However there is no information indicating that the company is not effectively utilizing its energy resources. The activities of the company do not involve emission of greenhouse gases to the environment. This means that its activities have positive impacts on sustainability in terms of the environment. Some of the wastes generated by the organization may however have some hazardous effects. This includes the chemical containers as well as the substances used in the veterinary practice. On the social aspects, the company is working closely with the community members. This is considering that most of its clients are famers who are part of the community. This is despite the difficulties that the company is faced with when dealing some of the famers. Some of the famers do not pay their bills on time and hence impacting negatively on the financial operations of the company. The public policy of the company is however not clear and this impacts negatively on its disclosure as well as sustainability. Corruption is a social problem that has negative impacts on the accounting activities (Epstein & Buhovac, 2014). Although the company has not reported incidences of massive corruption it lacks adequate policies to address the issue. On the accounting aspect, the company lacks an effective reporting mechanism and structures. This is prone to impact negatively on its sustainability. The system at the company is not flexible and it influences on the reporting procedures. The international models for accounting and sustainability are not in place at the company. Such models and frameworks are vital in ensuring that the organization is able to effectively address the problems associated with sustainability. Task 4 The company is facing a huge problem in terms of its structure and internal controls. The challenges associated to the structure and internal controls are likely to affect the accounting activities. It is recommended that the company should change its structure. A centralized mechanism should be put in place in order to promote transparency, efficiency and accountability when dealing with the inventories. The organizational structure also requires some restructuring so as to effective meet the accounting needs. The accounting system used by the company has to be changed in order to improve on the efficiency. It is recommended that lean accounting should be introduced at the company. This involves the examination of processes and the related results in order to determine how to create more value at a lower costs (Weygandt, et al., 2015). This system will also play an essential role in ensuring that the problems associated with low levels of accuracy are solved. Transparency will be promoted through the use of lean accounting system and hence ensuring that fraud is detected and avoided. It is recommended that the company should continue with the practice of allocating different accounting functions to different individuals. However, no single individual should be given more powers over the control of the accounting activities. This will play an important role in improving on ethics and transparency within the organization. The reporting system that is used at the organization should also be changed. It is recommended that the organization should embrace on the international reporting standards in order to improve on accountability and transparency. The software and hardware being used at the company contributes to the challenges faced by the organization. It is recommended that an integrated accounting software that manages all the accounting information of the company should be utilized. The computer security should be enhanced with regards to the password. Clear accounting and information technology policies should also be introduced at the company. It is recommended that sustainability measures and policies should be put in place at the organization. The training as well as the orientation method for personnel at the accounting department should be changed. This is for the purposes of enabling them to fully understand the policies and regulations that have been put in place. The organization culture should be transformed in order to put more emphasis on transparency and good relationship with the stakeholders. A positive organizational culture has the potential of improving on the accounting performance of the organization (Needles, et al, 2012). The roles of each of the members in the accounting department should be clearly defined. This includes the role of the personnel in dealing with the inventory. It is recommended that the company should put in place clearly mechanisms to ensure that an external auditor is involved in the process. The involvement of the external auditors will ensure that the internal controls within the organization are strengthened. List of References Weygandt, J.et al., 2015. Financial & Managerial Accounting. John Wiley & Sons. Needles, B. et al., 2012. Principles of accounting. Cengage Learning. Epstein, M. J., & Buhovac, A. R., 2014. Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts. Berrett-Koehler Publishers. Warren, D, L., & Young, M. N., 2011. Integrated accounting principles: A best practices course for introductory accounting. Issues in Accounting Education, 27(1), 247-266. Read More