Internalcontrol is a system of checks and controls instituted byorganizations into financial and non-financial activities foreffective operations. The objective of internal control is to ensurethat the business entity produces accurate figures during everyfinancial year while at the same time curbing fraud and theft. Thispaper seeks to examine internal controls in Perdue farms, a companyin Salisbury,Maryland.
InternalControl procedure at Perdue Farms
Anumber of internal control procedures are undertaken at Perdue Farms.These include Reconciliation and review. The activity involvesconducting reviews on transaction and activity records. The controlprinciple involves the collection of financial records byaccountants, reconciliation by internal auditors and a review of theinformation which is done by the board.
Segregationof duties is another vital aspect of internal control. The cashierscollect the sales proceeds, the storekeeper’s counter checkinventory as the accountant’s record and verify the sales.
Authorizedprocedures are put in place to ensure that company records and dataare stored correctly in an appropriate environment. The controlprinciple in this context is that passwords are put in place in orderto access vital company information. This ensures that onlyauthorized employees gain access to classified information.
Monitoringof operations is another vital form of internal control activityadopted by the company. Movement of employees and visitors within theorganization is monitored from a central area. In addition, an openair office system is put in place where all the activities undertakenby the employees are visible.
Communicationand information flow is another control procedure in the company.Different departments communicate effectively from the top hierarchyto the bottom levels. For instance communication from the sales toaccounting department is very smooth.
Riskassessment is an area of internal control which identifies andisolates areas that may be considered of greatest threat and risk tothe organization. The audit risk team evaluates potential risks tothe firm after which the information is forwarded to management toact on.
Valuationof records is carried out in order to ensure accountability in therecording of company assets. Internal inspectors carry out thevaluation. The findings are then submitted to management.
PhysicalSecurity the control is applied by ensuring that the security systemin the organization works affectively. Security guards and accesscodes are strategically placed in the company premises.
Complianceto accounting regulations this involves ensuring that the companycomplies with all the necessary accounting rules and regulations.Accountants ensure that financial records conform to the setaccounting standards. The finance manager then checks to see if thisis met.
Protectionof company assets is also implemented by the firm. Employees from theasset and control department ensure that company assets are in goodcondition. This is further reaffirmed by managers in differentdepartments.
Effectivenessof the controls observed
Frommy observation, the controls implemented by Perdue farms are actuallyeffective. This is because they can proactively minimize errors andfraud. For instance in each control activity, effectivecounterchecking is done by various employees and departments whichcreates more transparency.
Howimprove ineffective controls
The company can adopt various controls in order to reduce errors andfraud. One approach is through the use of detective controls. Such asystem is able to show errors and irregularities immediately afterthey occur.
Theorganization should also undertake performance reviews for theemployees based on previous and current activities.
Theremust be a set spending limit for different departments. This ensuresthat the overall organization works appropriately based on theplanned budget.
Improvementof Information technology standards to ensure that all departmentsrun more effectively.
The company should set corporate and departmental policies to ensurethat the employees are more goal oriented in order to achieve theobjective of the organization.