Internal Control and Risk Evaluation

A put on the line is the relegate of a negative event occurring. Internal controls are policies and procedures set in place to reduce the accompaniment of an associated risk. risk of infections are never entirely eliminated however, innate controls suffice reduce the occurrence and balance the risk. This brief forget discuss the risks of Kudler Fine Foods current Accounting Information System (AIS). In addition, the internal controls designed to mitigate the risks. Furthermore, this brief evaluates the internal controls for the AIS.Last, this brief addresses early(a) controls, outside of the AIS that Kudlers may use up. position Risks According to Hunton, Bryant, and Bagranoff (2004), agate line enterprises face a variety of risks, including business, audit, security, and continuity risks. Business risk means the alliance may not achieve its goals and objectives. A review of Kudlers strategic plan will help determine the business risk. The adoption of the new Just-In-Tim e (JIT) inventory system would be an IT timing risk. An IT timing risk is an example of an internal business risk that Kudler would face.An audit risk is the likelihood that Kudlers external hearer would make a mistake in his or her opinion of the financial statements. Audit risks are rugged down further into inherent, 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 comp either has in place would not prevent a material error. Detection risks are the likelihood the audit procedure would not detect material errors. certification risks involve data access and integrity. The AIS converts raw data into useful information.To ensure the data integrity, Kudler will get hold of to control the risks associated with collecting and processing the data. By implementing the JIT inventory system and point of sale system, data is elegant as soon as something purchased from the s tores. This mitigates human error under the old system. Continuity risks are associated with the AIS availability, backup, and recovery. Kudlers will fate 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.Any down time of the website would be say-so loss of business. Internal Controls Management must design and implement the internal controls. However, this is just two steps of the control process. Management must evaluate the controls for forte. Kudlers size would not necessitate an internal meeter however, an external auditor would be beneficial in testing the effectiveness of the controls. In addition, Kudlers would need to document 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 purpose of each familiar ledger account) 2. A comp lete description of source documents individuals must use to record accounting proceeding 3. A comprehensive description of the authority and responsibility assigned to each individual Controls Outside 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 confidential 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 vital 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, management will need to assess the risks associated with expanding business. However, these risks are balanced out by the expected increase in business proceeding to ensure Kudlers lasting success.