look tab the files attached and Add to your memo from Milestone 2-3 page , document your understanding of the relationship between audit risk, audit evidence, and financial statement assertions as i
ROBBINS NETWORK SERVICES INTERNAL CONTROL 0
To: Manager
From: Davis Johnson, VP Risk Management.
Subject: Internal Controls
Cc: Board of Directors
Date: November 10, 2021
The significant financial business transactions of the company:
Business transactions are vital to understanding various aspects of an organization, particularly those related to its internal control systems. Robbins Network Services (RNS) core finance business activities and transactions entail providing and installing software, networking hardware, and computers for clients. The organization also offers consultation services to other firms regarding information technology. Furthermore, to boost success, RNS utilizes services from experts with technical knowledge to provide much-needed operations. Since the organization seeks to remain competitive in the industry, it presents different products and services. For this reason, Robbins Network Services requires ensuring they give customers the most desirable services and products in a timely way.
Evaluation of business risks associated with this company:
Business organizations usually experience a wide range of perils that might limit the successful execution of business opportunities. Similarly, RNS experiences specific risks that delay its effective operation in the industry. First, potential downturns linked to the US economy are a significant peril RNS may undergo in its business. According to Zeman, economic downturns create a substantial threat to business transactions and activities (2019). Secondly, RNS encounters increased predatory pricing initiated by competitors eyeing a larger market share, which impacts the company's potential to reach new customers.
Furthermore, RNS also experiences high marketing expenditures that do not present expected outcomes regarding reaching more potential clients. Spending increased amounts of financial resources on inefficient processes is a risk that can affect the business (Akisik and Gal,2017). This explains how poor internal control systems that present unproductive advertising can hurt a business organization. Additionally, RNS also experiences other risks, including credit losses and software development operations' generation of unsustainable products. In this sense, such business risks are a core threat to company activities, and RNS must work on sorting them out.
The appropriate types of internal controls:
Successful organizations attribute their long-term prosperity to various firm aspects, including internal controls. adequate and practical internal controls are crucial in operational success (Iwejor,2017). For this reason, RNS requires robust internal controls to boost its activities. First, RNS should focus on implementing duty separation as an internal control. A distinction of duties provides an opportunity for each active personnel to execute specific assigned tasks, such as auditing, reporting, deposits, and bookkeeping. Secondly, RNS requires access controls for its accounting system. The access controls are significant because they allow each accounting system to utilize certain logs to enable only authorized individuals.
Thirdly, assets' physical auditing is a critical internal control that can contribute to successful changes at Robbins Network Services. Physical audits are vital since they provide accurate information concerning inventory and cash, which puts the company in a transparent position. Another notable internal control for RNS involves utilizing 7-day trial balances, which entail double-entry records ascertaining that the firm's debit records are equal to entries on the credit side. These internal control systems can help boost RNS operations.
Ethical issues involved with company and industry
Ethical issues are a normal part of the business world and understanding them is essential to ensure a business avoids them. RNS faces ethical concerns that it must sort out to operate smoothly in the industry. To begin with, manipulation of figures in the accounting and finance departments is a moral concern that can lead to the fall of a business organization. For instance, derivative manipulation played a central part in the fall of Enron, which is a crucial ethical issue. (MacCarthy,2017). For this reason, RNS must avoid such issues and ensure that its accounting department records essential and relevant details. Another notable moral concern, in this case, entails confidentiality issues. Undesirable maintenance of confidential data and information can lead to leaks, which affect the firm negatively. Thus, the company must avoid these ethical issues for better business outcomes.
Current events for their impact on this company's risk and internal control in the future:
One significant event that might impact RNS' internal controls and firm risk includes advanced technologies. According to the Wall Street Journal businesses require new internal controls due to technological advancement. As an illustration, artificial intelligence and automation change how companies operate, prompting business organizations to implement new internal controls, particularly those working on software aspects. Additionally, the current COVID-19 pandemic has a significant influence on internal controls and company risk. According to Zhu and Song, the outcomes of the pandemic on internal controls can create problems for firms. Thus, the changes and consequences must be assessed to ensure RNS stays ahead of the changing business circumstances (2021).
References
Akisik, O., & Gal, G. (2017). The impact of corporate social responsibility and internal controls on stakeholders' view of the firm and financial performance. Sustainability Accounting, Management and Policy Journal.
Iwejor, I. C. (2017). Internal controls: Identifying control elements and implementation dynamics facing retail companies (Doctoral dissertation, Walden University).
MacCarthy, J. (2017). Using Altman Z-score and Beneish M-score models to detect financial fraud and corporate failure: A case study of Enron Corporation. International Journal of Finance and Accounting, 6(6), 159-166.
The Wall Street Journal. (2020). Advanced Technologies Call for New Internal Controls. Retrieved from https://deloitte.wsj.com/articles/advanced-technologies-call-for-new-internal-controls-01581624126
Zéman, Z. (2019). New dimensions of internal controls in banking after the GFC. Economic Annals-XXI, 38.
Zhu, P., & Song, J. (2021). The Role of Internal Control in Firms' Coping with the Impact of the COVID-19 Pandemic: Evidence from China. Sustainability, 13(11), 6294.
