'Justification for an Internal Control System\r'

'Over the past socio-economic classs m either a nonher(prenominal) organizations suffer f each(prenominal)(prenominal) tolden because of inadequate fiscal reportage and in impelling controls. To overcome this dilemma, the creation of the Sarbanes Oxley Act (SOX) of 2002 requires corporations to treat full control over its fiscal reporting and accounting by placing intimate controls within its organization. ingrained controls not solo establish the foundation of reasonable assurance for meeting companionship objectives scarce withal provide functions in achieving other objectives. These objectives atomic number 18 available effectiveness and efficiency, relevant and tested financial data, and corroborate law and regulation compliance.\r\nAs a restraint of this social club single believes that inwrought controls are central for these areas to be supremacyful. Although this business uses the policy and portfolio nestes as controls to mold the association of trys with activities, one believes an essential control governing body would be more beneficial for this connection. Current Approaches indemnity Approach Insurance is not as monstrous as it can be for a connection because it is a instruction of looking at the encounter along with knowing that an acceptance of sack is award for a play along.\r\nCompanies basically carry policy policies to impede and cover large liabilities from natural disasters or accidents. infra this feeler trouble is stating an acceptance of a loss is present for a smart set when insuring the company, assets, or its employees. For a company using this antenna security measures is the neverthe little gain in knowing the company has insurance to cod a claim to replace or receive monies for the loss (McCarthy & Flynn, 2004, p. 75). However, the insurance approach is more of a tool for take a chance support than a tool for risk management.\r\nThis is because this approach is unstable in mitigating the impact of a loss preferably than pr pointive in protecting the company from a loss. This approach can be beneficial for the company if a company can find low-priced insurance with deductibles the company feels comfortable with. This is because the company would scarce be responsible for paying the deductible and the insurance company would pay the rest in the event of a catastrophic disaster. Portfolio Approach Unlike, the insurance approach the portfolio approach has more structure and complexity.\r\nThis is because during the process of decision- do it gives more procedures and processes in making a decision (Thomas, 2002, para. 23). The primary(prenominal) idea behind this approach is to maximize investments of a company while minimizing the risks of the company. level(p) though this approach organizes to an extent the decision-making process it does not provide protection assurance for the investment against risk. The portfolio approach is beneficial for a co mpany when the company wants to measure the type of risk it wants to take on along with the likelihood of making a positive return on that risk.\r\ninner bidding System To an organization a indispensable component to risk management procedures is a reliable internal control schema. This trunk helps regulate, reduce lost, and besmirch risks along with accomplishing the organizational goals and success of a company (McCarthy & Flynn, 2004, p. 249). Benefits of an internecine Control System in general the insurance approach is necessary for a company to overcome the risk of a loss. The portfolio approach is an effective approach but is more re progressive than preventive.\r\nEven though a business may have insurance and portfolio approaches in place these approaches are not efficient and cost-effective enough to protect the company from risks like an internal control system can. Internal control systems are unlike the insurance and portfolio approaches because these systems are proactive tools in risk management. This type of system ensures the protection of company assets through a system of policies and procedures. In addition, this system establishes reliability in financial data along with establishes compliance with laws and regulations set forrader from regulations like the SOX Act.\r\nThese types of systems also help to improve internal and external communication processes within a company. recommendation As a controller of this company, one recommends that management incorporates an internal control system into the company. This is because this system go out be more beneficial to the company in the long-run than the current approaches the company already has in place. One believes an internal control system ordain help protect the company from un veritableties as rise up as ensuring the company is operating in right(a) accordance with its mission and goals.\r\nJustification for an Internal Control System\r\nThe internal control system ha s been employ since the company was in need of the system and until this twenty-four hours it has been working to its fullest potential. Internal control plays an important underlying in making sure that the accounting information, financial data, meeting the tar prepares, and ensuring that the management policies are getting followed. in that respect are two elements in making an internal control system successful. These elements are portfolio approaches and insurance. Even though they both help the internal controls, they are just about different.Portfolio approach is used in different ways, this helps make investments decisions easier. It also balances the risk against the routine of the company. When discussing portfolio management it is cognize that there are two types of management: active and still. Active management can be only one manager or a group but regardless if it one or more. They all have the same idea in mind, which is to get a better market return and they do this by constantly checking the funds portfolio. A passive management just checks the market index; it does not necessarily say that the passive management is less capable of doing its job.â€Å"Every companys risk management â€Å" effect” will be unique because the exposures and risk impulses all differ. The key is to have a reasonable under-standing of how individually treatment option works, alone, and in combination with others, so that decisions are informed and results are less influenced by luck than by reason (McCarthy, Flynn, & Brownstein, 2004). The appetite for risk will constantly depend on the management aggroup. We will need to understand every risk and think of the options before continuing. A undischarged return is always good but a big loss will hurt more.Insurance is another(prenominal) element that was put in place with the internal controls. Insurance will protect the company in case of an error occurs. There can always be risks in a company , but it is the way we handle them, what is important. When they add insurance it is for a stop of mind, a company wants to be cover in case something did happen. Weather risks can happen anytime and any day. It can be challenging thinking best option for the business. Due to the fact that no one can know what will happen tomorrow but is it better to be protected. As the controller some of the aspects to look into is what do we need.There hasn’t been a pass in this area for more than 50 years, the question to think is, and do we need tornado insurance? The company was built once but if a risk strikes, it would be really hard-fought to restart the company without developing a financial plan. The company will continue to grow every day, and we need to keep that in mind with the insurance. When the insurance was first put in place, the management team covers everything they thought was needed. However, we may not need certain things that are currently been covered by the ins urance. That is why it is very important to do a six month or even a year checkup on the insurance plan.As the controller of the company there are tasks to be completed such(prenominal) as compliance, reporting, budgets, analyzing, and goals. The internal controls help the company and peculiarly the controller achieve all these tasks and stay with-it with them. Having internal controls can prevent any losses due to fraud and minimize the loss in assets. It also helps with everyday business activities and what to do in a situation in which a risk is encounter. For the previous reasons that were discuss the company’s success will be much better out having the internal controls with a combination of insurance and portfolio approaches.\r\n'