Internal control and information quality

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 EXECUTIVE SUMMARY
Internal control is a process for assuring accomplishment of an business goals in the
operational effectiveness and efficiency, reliable financial reporting and compliance with laws,
regulation and policies. In other words, it can be said that internal control is an accounting and
auditing whose purpose is to achieve the organisation’s objective and maintain reliable financial
reporting. The report is going to provide in-depth knowledge about internal control and its
measures to enhance the financial reporting integrity leading to the quality of accounting
information with respect of Toshiba. Cited venture was recently accused of providing misleading
information of its earning.

Sample Report on Internal control and information quality

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 Table of Contents

EXECUTIVE SUMMARY .............................................................................................................1

INTRODUCTION ...........................................................................................................................3
TASK ...............................................................................................................................................3
1. ..................................................................................................................................................3
2. ..................................................................................................................................................5
3. ..................................................................................................................................................5
4. ..................................................................................................................................................6
RECOMMENDATIONS .................................................................................................................7
CONCLUSION ................................................................................................................................7
REFERENCES ................................................................................................................................8

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INTRODUCTION
Internal control can be defined as a systematic accounting and auditing process through
which reliable financial information can be managed and controlled in order to attain specific
objective in the business enterprise (Assarlind and Gremyr, 2016). Effective control assists in
reducing the risk of asset’s loss and helps in ensuring that plan information is complete and
accurate as well as financial statements are reliable. Along with that, it assesses that whether the
plan complies with laws and regulations or not. According to the case, Toshiba was recently
accused of providing misleading information of its earning. So, this project defines various
important framework of internal control through which firm can reduce its negative impact on
business. In addition to this, report provides literature review to define internal control and its
roles in financial reporting integrity by the use of four different academic journal articles.

TASK
1.
Internal control is a systematic measure such as reviews, checks and balances as well as
methods and procedures instituted by corporations to conduct their business in an orderly and
efficient manner and to safeguard its assets and resources. In other words, it can be said that
internal control is a business practice, policy or procedure that is established within business
enterprise to create value or minimise risk. With assistance of internal control methods, company
can ensure the integrity of financial and accounting information to meet operational and
profitability targets (Bo and et.al., 2015). For this concern, company have to documented to
create an audit trails. Furthermore, management of an entity is responsible for the establishment
and maintainable of internal control. In order to get in-depth knowledge about the internal
control in financial reporting, various journal articles can be used. According to the (), system of
internal control provides assurance to management of dependability of accounting data used in
decision making of corporation. It has been discovered that due to lack of internal control,
several banks have been discovered to have defrauded its customers. In the organisation,
management uses internal control as a tool to check its staff due to the fact that managers are not
able to monitor the activities of corporation (Chaudary, Zafar and Salman, 2015). It therefore
adopts the internal control in such a way that the system checks itself, management can use
devices such as segregation, supervision of work and acknowledgement of performance. The
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effective arrangement and implementation of this control system would ensure proper
management. According to the (Haider and et.al., 2015), effective internal control system plays
an important role in ensuring achievement of organisation’s objectives.
As per the viewpoints of (Jacobs, Swink and Linderman, 2015) success of any company
is dependent on its management which reflects their ability to control cost to minimum level and
hence, profits can be made. In this manner, author stated that internal control system is effective
and helpful because this system has been recognised in most of the organisations as one of the
most essential ingredients that is necessary for the survival of business enterprise and
government agencies. Author defined that internal control is the process by which manager
assures that resources are obtained and used effectively and efficiently in the accomplishment of
company objectives.
Garrison and Norren has stated two different definition for internal control in which one
is that steps taken by management that attempt to increase the likelihood. The objective set down
at the planning stage are attained and to ensure that all parts of the organisation function in a
manner consistent with organisational policies. Further, the authors have asserted Internal control
as that set of organisational activities which includes planning, coordination, communication,
evaluation and decision making as well as informal processes aimed at enhancing the effective
resources to attain goal of company (Ji, G.H and Sun, 2015).
According to the article journal of (Kim, Kumar and Kumar, 2012) only an effective
internal control in the enterprise is able to help objectively assessing the potential development
and tendencies of enterprise performance and thus to detect and eliminate the threats and risk in
due time as well as maintain a particular fixed level of risk and to provide for its reasonably
security. It may also help to elaborate a structural scheme of generalised concept of internal
control. On the other hand, in the specialized dictionary of economic terms, control is defined as
performance with a definite influence on the management of an enterprise, as right based on laws
and contract that involve proprietary right to the whole property or its part or any other right that
enables to exert a significant influence on the management and performance of the enterprise or
state supervision.
According to the journal article (Reijers, Mendling and Recker, 2015) it has been stated
that internal control provides a systematic arrangement of monitoring the accounting operational

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activities of business enterprise. With assistance of internal control system, company can easily
control its financial reporting and its uses in the business.

Task 2.
Toshiba is a Japanese multinational conglomerate corporation headquartered in Tokyo,
japan. Its diversified products and services includes information technology and communication
equipment and systems, electronic components and material. Cited venture was founded in 1938
as Tokyo shibaura electric K.K through the merger of shibaura seisaku sho and tokyo denki.
Toshiba is organised into four business grouping the digital products group, the electronic
devices group, the home appliances group and the social infrastructure group. The group
expanded rapidly driven by a combination of organic growth and by acquisition, buying heavy
engineering and primary industry firms in the 1940 and 1950 ( Henry and Adewale.
2013).Toshiba first announced in may 2015 that it was investing an accounting scandal and it
might have to revise its profit for the previous three year.

Task 3.
In the Toshiba company there have various issue related to the internal control and
misleading information. According to the observation the investigation committee observe that
according to the division of duties rules of Toshiba the corporate audit division is in charge of
auditing the corporate division the companies, branch companies and affiliated companies.
In following five internal control challenges are some of the most common found in the
organisation-
 Separation of duties- This is the major problem in the internal control management
system in the organisation. Toshiba also faced this issue. The performance of citical
function is typically divided among different employees. In the small businesses with
limited human resources, it is not uncommon for a single employees to be soley
responsible for completing multiple task in a critical process.
 Policies and procedures-One another issue in the control auditing is policies and
procedure,Toshiba has faced this issue because it are responsible to follow all policies
and procedure related to the company which has made by the government.
 Documentation- Maintaining accurate and relevant information is another issue for the
company in order to maintain internal control. It can be difficult to demonstrate existence
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 of transaction completed , procedure , performed and control in place. Proper
documentation can also make it easier and more efficient to reach and respond to
question from customer and management and auditor.
 Oversight and review- This is another major problem in the maintaining and conducting
the internal control in Toshiba. Company have to face the issue related to pay enough
attention to basic internal control monitoring procedure. Proper oversight is essential to
the internal control framework and an important aspect of fraud prevention and detection.
 User access right for information systems-Employees are often granted more access to
information systems than they actually need to perform their job responsibilities. This
may be done for ease of application or because the person granting access (often the IT
administrator) does not fully understand the new employee’s role. However, providing
such access can expose the business to additional risks that business leaders may not be
aware of.

Task 4.
As per the above discussion it has been ascertained that there are various issues which
have faced by the Toshiba company in order to maintain and manage the internal control for
financial reporting. In order to overcome this issues from the company, various strategies are to
be followed which are as follows-
 Management personnels should have high integrity and ethical value and be committed to
integrity performing key internal control procedure.
 Key control performed by management personnels can overcome the lack of segregation
of duties. COSO suggest reviews of accounting systems reports, inspections of
supporting documents.
 Company should develop its internal management system through which it can reduce the
challenges regarding internal control system. It should hire more talented and skilled
accountant employees so as they can contributes their best participation in the
maintaining and updating the financial information.
 The system of internal control should maximise effectiveness and efficiency by including
that are tailored to the nature, size and complexity of the entity. Since the policies and

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 procedures are usually informal for smaller entities management personnel should
communicate internal control through frequent contact with accounting personnel.
 With these internal control prevent all error or fraud from occuring in business can
minimise.
 Board of governance should have more hand on oversight involvement in the entity's
activities. Some board members may even perform monthly entity level control such asd
inspecting and approving supporting \documentation for check written.

RECOMMENDATIONS
As per the above discussion it has been ascertained that in order to maintain the internal
control system company haver to effectively monitor its business activity and function related to
financing and accounting. Further more, Toshiba should effectively monitor the activities of the
financial department so as it can properly implement the internal control action.Management
personnels should have high integrity and ethical value and be committed to integrity performing
key internal control procedure.

CONCLUSION
Internal control can be defined as a systematic accounting and auditing process through
which reliable financial information can be managed and controlled in order to attain specific
objective in the business enterprise. Effective control assists in reducing the risk of asset’s loss
and helps in ensuring that plan information is complete and accurate as well as financial
statements are reliable. From this project it has been concluded that Company should develop its
internal management system through which it can reduce the challenges regarding internal
control system.

It should hire more talented and skilled accountant employees so as they can contributes their
best participation in the maintaining and updating the financial information.

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REFERENCES
Books and journals
Henry,O. and Adewale. (2013). Impact of the Effective Internal Control System on the Internal
Audit Effectiveness at Local Government Level. Journal of Social and Development Sciences
Vol. 4, No. (1), pp. 16-23
Assarlind, M. and Gremyr, I., (2016). Initiating quality management in a small company. The
TQM Journal. 28(2).pp.166-179.
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mega land reclamation projects: A case study. Soils and Foundations. 55(4). pp.895-905.
Chaudary, S., Zafar, S. and Salman, M., (2015). Does total quality management still shine? Re-
examining the total quality management effect on financial performance. Total Quality
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Safa, M., and et.al., (2015), August. Automating measurement process to improve quality
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Spofford Jr, W. O., Russell, C. S. and Kelly, R. A., (2016). Environmental quality management:
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