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Kudler Internal Control & Risk Evaluation

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Kudler Internal Control & Risk Evaluation
In order for a company to be successful and maintain its integrity, internal controls are necessary. If Kudler should decide to utilize industry-specific software, then the company would need to evaluate the internal controls and risks associated with the four systems (payroll, accounts payable, accounts receivable, and inventory). Currently the company does not have any real controls in place to reduce risks. The following information will discuss Kudler’s current internal control risks, ways in which to mitigate those risks to the systems, and evaluate the application of internal controls to the new accounting system.
Risks in the System
Managing risks is an ongoing process. When considering information technology, and Kudler’s new information system, there are four types of risks to evaluate: business risks, audit risks, security risks, and continuity risks. Kudler’s business risk would be whether the company achieved the goals set for the business. The audit risks would be if the auditor provided accurate a correct opinion that Kudler’s financial statements were accurate and reliable. Security risks involve the integrity of the company. Continuity risks would be if the accounting system had backup and recovery available. In the new payroll system each employee’s time should continue to be entered into the system and be approved by management. It may be a good idea to have the HR manager review each employee’s time against the time clock. When the payroll is submitted to the bank, a separate employee should complete the payroll entry in the accounting system. The accounts payable system could use a few policies to improve the internal controls and help to reduce risks. Kudler should ensure segregation of duties. All invoices should be sent to a central location and approved by a member of management.…...

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