Importance of Internal Controls in Safeguarding Assets

School: Southern New Hampshire University - Course: ACC 201 - Subject: Accounting

4-1 Assignment: Internal Controls Southern New Hampshire University ACC-201 Ashley Ogle

Internal controls are an important part of any organization's plan to safeguard a company's assets[ CITATION Acc201 \l 1033 ]. With this system in place, it ensures the reliability and accuracy of the financial reporting and is set up to deter possible fraudulent activity. Effective internal controls are crucial for any business, regardless of size, to prevent fraud and errors and improve the overall operational efficiency of the company. With internal controls, there is a sense of accountability and transparency within the business which can lead to ethical behaviors and a culture of integrity. A factor within the internal control is regularly assessing and updating the protocol to ensure they are effective in mitigating the risk and protecting the business[ CITATION Acc201 \l 1033 ]. In this case, we have 2 HD TVs that have seemed to go missing over the last week. There are two possible internal controls that could be implemented to prevent this from happening again. The first would be regular physical inventory counts. Having a staff member outside of the warehouse to do a physical inventory will make things easier to pinpoint and investigate if need be. Conducting regular inventory counts could also be used as a deterrent to employees who may be tempted to steal or misuse the inventory. Another option would be to restrict access to the inventory to authorized personnel only[ CITATION Acc201 \l 1033 ]. This could be locked storage areas, access codes, or keys/badges with access. With these options, you have a better chance of narrowing down who and where the inventory went. Inventory checks can be put into a database and when the inventory is counted it can automatically be sent to the owner and therefore the owner is immediately notified of a discrepancy in the inventory. With these types of systems, you can set a threshold that will notify the proper personnel when the inventory falls below it. For this to work