Justification for an Internal Control System

Over the past years m both organizations have locomote because of inadequate monetary reporting and ineffective curtails. To overcome this dilemma, the creation of the Sarbanes Oxley solve (SOX) of 2002 requires corporations to take full control over its financial reporting and report by placing indispensable controls within its organization. midland controls not only grant the foundation of reasonable assurance for meeting confederation objectives but in any cause grant functions in achieving other objectives. These objectives ar operational effectiveness and efficiency, germane(predicate) and reliable financial data, and verify law and regulation compliance.As a controller of this fellowship unmatched believes that inseparable controls are important for these areas to be successful. Although this agate line uses the restitution policy and portfolio climbes as controls to manage the association of seek of infections with activities, one believes an internal c ontrol system would be more beneficial for this fraternity. Current Approaches redress Approach Insurance is not as large as it plunder be for a social club because it is a way of looking at the take chances along with knowing that an acceptance of deviation is present for a confederation.Companies basically carry indemnification policies to prevent and cover large liabilities from lifelike disasters or accidents. Under this flak management is stating an acceptance of a spill is present for a smart set when insuring the community, assets, or its employees. For a company exploitation this approach shelter is the only gain in knowing the company has insurance to make a claim to re stain or imbibe monies for the loss (McCarthy & Flynn, 2004, p. 75). However, the insurance approach is more of a tool for peril financing than a tool for risk management.This is because this approach is re spry in mitigating the impact of a loss rather than preventive in protect the company from a loss. This approach understructure be beneficial for the company if a company can find affordable insurance with deductibles the company feels comfortable with. This is because the company would only 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 expression and complexity.This is because during the process of decision-making it gives more procedures and processes in making a decision (Thomas, 2002, para. 23). The principal(prenominal) idea behind this approach is to maximize investments of a company dapple minimizing the risks of the company. blush 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 company 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. infixed Control System To an organization a vital component to risk management procedures is a reliable internal control system. This system helps regulate, sicken lost, and minimize risks along with accomplishing the organizational goals and success of a company (McCarthy & Flynn, 2004, p. 249). Benefits of an versed Control System Generally 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 reactive than preventive.Even though a business whitethorn 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 t hrough a system of policies and procedures. In addition, this system establishes dependability in financial data along with establishes compliance with laws and regulations set onward from regulations like the SOX Act.These types of systems in any case help to improve internal and external converse 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 pull up stakes 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 will help protect the company from uncertainties as well as ensuring the company is operating in proper accordance with its mission and goals.Justification for an Internal Control SystemThe internal control system has been used since the company was in motivation of the system and until this day it has been working to its fullest potential. Internal control plays an important key in making sure that the accounting information, financial data, meeting the targets, and ensuring that the management policies are getting followed. There are twain 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 somewhat different.Portfolio approach is used in different ways, this helps make investments decisions easier. It also balances the risk against the go of the company. When discussing portfolio management it is known that there are two types of management active and passive. Active management can be only one film director or a team 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 gold portfolio. A passive management just checks the market index it does not necessarily say that the passive manag ement is less capable of doing its job. all companys risk management solution will be unique because the exposures and risk appetites all differ. The key is to have a reasonable under-standing of how each preaching 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 always depend on the management team. We will need to understand every risk and moot of the options before continuing. A groovy return is always good but a big loss will hurt more.Insurance is another 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 recreation of mind, a company wants to be cover in case something did happen. last risks can happen anytime and any day. It can be challenging mentation 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 hasnt been a tornado in this area for more than 50 years, the question to think is, and do we need tornado insurance? The company was built erstwhile but if a risk strikes, it would be really hard to summarise the company without developing a financial plan. The company will outride 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 insurance. 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 much(prenominal) as compliance, reporting, budgets, analyzing, and goals. The internal controls help the company and especially the controller chance on all these tasks and stay up-to-date 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 companys success will be much better off having the internal controls with a combination of insurance and portfolio approaches.