 In this discussion we will discuss the discussion question of list and describe the principles of internal controls. Now when we talk about internal controls we're talking about a specific list of activities or some activities or some system that we're going to put together in order to achieve objectives. American objectives have been and remain incomprehensible. Now we can talk first about what those objectives are a little bit in terms of the internal controls and then go over the types of principles that we're going to put in place in order to achieve those objectives. The idea of internal control seems pretty simple at first glance but it can get very complicated very quickly as we start to look through different techniques and then list out the principles we're going to in order to get to the ultimate goals of the internal controls. So the goals of internal controls are going to include things like safeguarding the assets, making sure that we have a system that is set up that's going to be in compliance with policies and regulations and being in compliance with laws and regulations as well. We want to have a system that's going to promote growth in the operations, so a system that's going to promote efficiency within the operations. We want to have a system that's going to have a good paper trail. We want to have a system that is going to result in us having data that we can look at and see and make decisions on so those are gonna so we want to have controls that in other words are going to make accurate financial statements we also want to have controls that are going to reduce the likelihood of fraud or anything such as fraud within those controls so once we take a look at the internal control goals and then we want to take a look well what are the principles that we can apply in order to achieve those ultimate objectives those are going to include things like establishing responsibility we want to maintain adequate records we want to have the assets make sure the assets are ensuring assets so that if in case of loss we want to have a separation of duties or some of the most common types of principles of the internal controls one of the first ones you probably want to think of is is the separation of duties that's going to be one of the things that when you go into a system we're going to have this separation of duties and it can often be a situation where we you know we think well why are we doing this why do we have this separation of duties here when it could be a lot faster to do things a different way so the separation of duties is going to be an idea that will lead to some of these some of these objectives that we have in that it's going to hopefully reduce fraud and hopefully lead to good accurate record keeping but it can add a level of of of complication to separate the duties for example we want to have the custody of things like assets to be different than the record keeping of things like the assets so in particular cash that would be we want to have those two things separate so that the person who was handling the cash if they were to steal the cash then someone else would be able to catch that and if the person recording the information wants to do something they can't steal the cash because they don't have physical control of the cash so that would be one idea we also have separation of responsibilities within different transactions which again will help us to have two eyes basically looking on a single transaction reduce the error from one individual person or fraud committed by one individual person so that's going to be one of the principles that you probably want to think of first when thinking about internal controls but it is really important to also think about some of these others establishing responsibility it's going to be very important because and it's also something that's overlooked within an organization as an organization grows we obviously have pretty broad objectives our objective is to you know service our customers and this where that provide the best customer service and we often can get to a situation where we were an organization basically says everybody needs to chip in on this goal of provide you know doing this and providing the best service providing the financial statements and if we don't really assign goals specifically however then it's a lot of critical tasks may fall through the cracks and once they do when we see when we go back and look at it we won't be able to know who is actually responsible for it so in order to both praise people that do a good job and in order to follow up where there's problems we really need to have defined responsibilities within our system who is responsible for what how can we measure that responsibility we want to have adequate record keeping and of course that's going to be a critical system within the internal control system and it's something as we have more technology involved we automate more things and that could actually lead to less kind of an audit trail but we can compensate for that within the computer system and put in systems in place to make sure that we have the records the audit trail in place so that we have the financials you know the records there that will back up the end product that being the financial statements we also have controls that could be in place with relation to the technology that we have for example the computer technology using a database program is going to be a system that can really help us to increase internal controls it can help us to separate duties it often obviously the computer system will help us to reduce data input type of errors because it will catch it will automatically catch things if for for example not in balance if we record something that's not in balance the computer system can help us to pick up those that stuff now note of course computer system has pros and cons because automating systems means that there's no person running the system and we do need to go back in and make sure that we have the checks in the system to see that audit trail to see what's going on rather than just automating the process and and not being able to go back and see okay what happened how was this thing created and that's some components to the system that we have to set up through it we also want to have a regular reviews of the system and that's going to be really important because like we said with the separation of duties it's very possible that as we increase controls that we make their system more complex as a trade-off to having some of our other goals being met meaning reducing fraud and having a system in place that reduces fraud and the likelihood of theft and has better record keeping may take more time and then having one person for example do the entire process or know the entire process or have access to the entire process or to have everybody have access to everything now that might make things easier because then if there's a problem we have more people that know how to fix it but if we don't have that separation of duties we increase the likelihood of fraud and we don't have separation of duties we won't have a clear delineation of who's responsible for what and that will lead to more problems so in other words it's a human nature to try to find the simplest way to get to something not taken into consideration the other reasons why the internal controls are in place and therefore they're gonna probably shortcut the system and we're gonna want to do the reviews to make sure that not only we've put together a good system of internal controls but they are being followed a good system of internal controls doesn't matter if it's not implemented well and so we have to go back and do the reviews and make sure that the system is put in place and implemented as designed