Internal Control and Risk Evaluation

A risk is the chance of a negative event occurring. Internal determines be policies and procedures set in place to reduce the occurrence of an associated risk. Risks ar neer entirely eliminated however, knowledgeable controls help reduce the occurrence and balance the risk. This instruct will discuss the risks of Kudler Fine Foods current accounting Information System (AIS). In addition, the internal controls designed to mitigate the risks. Furthermore, this abbreviated evaluates the internal controls for the AIS.Last, this brief addresses other controls, outside of the AIS that Kudlers may pauperisation. differentiate Risks According to Hunton, Bryant, and Bagranoff (2004), business concern enterprises face a variety of risks, including business, take stock, security, and continuity risks. dividing line risk means the company may non achieve its goals and objectives. A review of Kudlers strategic plan will help meet the business risk. The adoption of the new Just-In- Time (JIT) inventory system would be an IT time risk. An IT timing risk is an example of an internal business risk that Kudler would face.An audit risk is the likeliness that Kudlers external auditor would make a mistake in his or her opinion of the financial statements. Audit risks are broken down further into infixed, control, and detection risks. Every business has inherent risk because doing business is risky in itself. Control risks are the likelihood the internal controls the company has in place would not prevent a material mistake. Detection risks are the likelihood the audit procedure would not detect material errors. Security risks involve data access and integrity. The AIS converts bare-assed data into useful information.To ensure the data integrity, Kudler will need to control the risks associated with collecting and processing the data. By implementing the JIT inventory system and point of deal system, data is processed as soon as something purchased from the stor es. This mitigates human error under the old system. Continuity risks are associated with the AIS availability, backup, and recovery. Kudlers will need to implement stronger firewalls and larger servers. This will ensure when Kudlers does business online, customers will be able to access the website at any given time. whatever down time of the website would be potential loss of business. Internal Controls care must design and implement the internal controls. However, this is just two steps of the control process. Management must evaluate the controls for effectiveness. Kudlers size would not necessitate an internal auditor however, an external auditor would be upright in testing the effectiveness of the controls. In addition, Kudlers would need to schedule policies and procedures to establish an audit trail. According to Bagranoff, Simkin, and Strand, (2008, p. 50-251), these documents should include 1. A chart of accounts (with the procedure of each general ledger account) 2. A complete description of author documents individuals must use to record accounting transactions 3. A oecumenical description of the authority and responsibility assigned to each individual Controls removed the AIS Kudler faces other external threats as well. These threats can be reduced by securing the AIS with firewalls, anti-virus, anti-spam, and other anti-spyware software. This will deter any potential hacker from accessing hole-and-corner(a) information.Whereas, the software will not completely eliminate the risks involved with doing business over the Internet or remotely from each store, the risks will be greatly reduced. Conclusion Risk assessment and internal controls are spanking to Kudlers continued success. Kudler will need to monitor the effectiveness of the internal controls once the new JIT inventory system is in place. In addition, instruction will need to assess the risks associated with expanding business. However, these risks are balanced out by the expected increase in business transactions to ensure Kudlers lasting success.