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Financial controls are basically all the crucial checks, as well as procedures that assist organizations to meet their duties in safeguarding their assets, manage risks and enhance quality financial reporting. This is achieved through the preservation of enough accounting records and preparing applicable financial info. For effectiveness, monitoring, directing and measuring of an organization’s resources are necessary. This document briefly focuses on the various benefits of the financial control and the best financial controls to reflect on. Additionally, it focuses on Apollo Shoes Inc. proposing a financial control system for it.
Some Benefits of Financial Control
There are innumerable reasons as to why using financial controls is important, but only a few will be mentioned in this document. To start with, they play a crucial role in ensuring that there is an accuracy in reporting, something that reduces fraud and shields the company’s resources, both intangible and tangible (Media & Mohr, 2012). Secondly, the financial controls play the role of risk management by taking into consideration the changes that might have occurred due to the influence of the existing conditions and which present permanence. Internal financial controls should also be able to detect things that are likely to maim the continuity of the company before they happen. In case they accidentally happen, they should help stakeholders find out sooner and take the appropriate actions. All these in-house control processes minimize process changes, contributing to more knowable outcomes.
Financial Controls to Take Into Account
There are various areas to take into consideration, to ensure that financial controls are successful. Some of these areas include: division of duties, management of inventory and availability of accounting software systems (Media & Mohr, 2012). It is important to ensure that staffing is done properly and the managerial team is operational to ascertain that all areas are catered for and the highest accounting levels have been implemented within the entire organization. This ensures that all reporting is done accurately. The management team has the responsibility of evaluating financial performance to ascertain that accounting and finance staff have the desired knowledge to meet the expectations of the company.
Proposed Model for Apollo Shoes Inc
Since Apollo is one of the companies that are likely to be paralyzed by scam, an effective model of internal financial control such as the reports filed in the Committee of Sponsoring Organization of the Tread way Commission (COSO) are recommended. COSO explains the in-house control as that composed of five major elements namely: risk assessment, control activities, control environment, monitoring and information communication (eNotes, 2012). This model is described as a pyramid, with control environment being the bottom for control activities, risk evaluation and monitoring. These levels are linked by information communication which is the backbone of the entire package. The reason why this system would be applicable for the Apollo shoes is that the company requires it that is contained within the system.
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One of the areas that this system would cater for within the company is the control environment. This sector includes the employees’ reliability, company’s competence and commitment, operating style and philosophy of the management, and the concentration of board of directors. This will ensure that there is a discipline and arrangement for the other components (eNotes, 2012).
The control activities within Apollo Shoes will address the risk-vulnerable areas. According to COSO, control environment is the most important component, since it enhances the best actions and control activities prevent incorrect actions from taking place (eNotes, 2012). It is thus obvious that implementation of this system would be beneficial to the company. Information and communication involves classification, capture, as well as exchange of financial information in a timely and effective manner. It is important at this point to note that people within the same organization with reliable and timely information get in a position to manage, perform and control the company’s operations.
Monitoring involves the evaluation of the eminent internal control. It provides information concerning the potential and the real breakdowns within a control system that would contribute to an organization achieve its objectives. Informal monitoring may include supervision checking with the assistants to check whether the objectives are being met. On the other hand, a more formal monitoring activity brings about the evaluation of the internal control system by the company’s internal auditors. Generally, it would be worthwhile for Apollo Shoes to implement this system, as it would improve all the company’s sectors.