Running Head: Internal Controls i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i 1
3-2 Final Project Milestone One: Internal Controls
ACC 411
Southern New Hampshire University
July 17,2022
Internal Controls i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i 2
To: Auditing team of ABC Accounting Pvt. Ltd.
From: Mr. Freddy Arguello, Auditor of ABC Accounting Pvt. Ltd.
Date: July 14, 2022
Subject: Evaluation of the internal controls of Robbins Network Solutions
Internal Controls of Robbins Network Solutions
Robbins Network Solutions (RNS) operates in the highly competitive and dynamic market
involving computers and networking products. An audit plan is created for the organization to
ensure that there exists proper internal control within the organization. A detailed analysis of the
business environment of RNS has been carried out. Additionally, the focus has been laid on the
typical business transactions that are performed by the firm. The business risks that arise before
RNS have also been identified. The impact of the current events on the risks and internal controls of
the firm in the future have been analyzed. The memo also sheds light on the potential ethical issues
that may arise for the firm and the types of internal control that must be adopted to maintain ethical
and professional practices.
Major financial business transactions
The chief financial business transactions that RNS is involved in include the selling as well
as installation of computer systems and networking software and hardware components. In addition
to making these offerings in the market, RNS provides information technology consulting to diverse
business entities. At present, the company has been focusing on designing its computer networking
software that will be sold to the customers. By aggressively marketing the services and products of
the business, the firm carries out its major financial business transactions. While conducting
Internal Controls i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i 3
business transactions, it is imperative for firms to maintain proper evidence such as cash memos,
invoices, salary slips, etc.
Highest business risks
RNS encounters a broad range of risks and threats while conducting its business activities.
Some of the major risks include high competition from top market players such as Dell, Apple and
Hewlett Packard (HP) and high expenditure relating to advertising of its products and services in the
market. The unpredictability that exists in the macro environment also increases the level of
uncertainty for the form. For instance, a major downturn in the U.S. economy could impact its
financial performance and market demand. Other risks that arise for RNS include the possibility of
credit losses exceeding sales benefits and the lack of viability of software development initiatives of
the business. As the industry in which RNS operates is influenced by evolving technology, the
degree of risk is high. Businesses that involve technology are prone to high risk and uncertainty
(Samimi, 2020). Competition is a major risk that could adversely affect its market share and
profitability.
Appropriate types of internal controls for the industry
Internal controls can be categorized into detective, corrective and preventive. Each of them
plays a distinctive role in an organizational setting (Types of internal controls. Finance &
Accounting, 2021). In the computer products and technology services industry, there is a need to
have in place appropriate internal control mechanisms. Such control mechanisms are critical since
they can offer reasonable assurance about the operations, reporting, as well as compliance
dimensions while conducting an audit process. In the specific organizational context, preventive
internal control measures must be adopted so that proper actions can be taken before the occurrence
Internal Controls i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i 4
of fraud or erroneous activities. For instance, a robust corporate governance framework must be
adopted that focuses on confidentiality, availability and integrity of data. Preventive internal
controls are suitable in the specific industrial setting since they can act as a barrier and block
undesirable events or occurrences from taking place. Some of the key steps that can be taken are
authorization of bills and invoices, verification of the expenses, etc. (DiNapoli, 2007).
Ethical Issues
A number of ethical issues are related to the RNS company that could have a direct impact on
the outcome of a financial audit process. One of the main ethical issues is the unethical behavior of
the two stockholders who are actively involved in the organizational transactions. There is a
possibility that they could focus on their personal interests and gains. The organization gives
preference to staff members that possess high technical expertise and skills. Such a staff selection
and hiring procedure could adversely affect the financial activities, including the manner in which
the transactions are recorded and maintained. For resolving the first ethical issue, all the
stockholders must take part in the business activities so that the possibility of fraud can be reduced.
Similarly, the hiring process must be made flexible so that employees with adequate financial
knowledge can be hired.
Current events impacting RNS’s risks and internal controls in the future i
Some of the current events that could impact RNS’s risks and internal controls in the future
include cybersecurity issues, changes relating to laws on taxes and accounting principles.
Additionally, regulations relating to the use of technology can also impact the risks that it
encounters and the manner in which it adopts internal control measures.
Thank You
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References
DiNapoli, T. P. (2007). Standards for internal control. New York State Government.
Samimi, A. (2020). Risk management in information technology. Progress in Chemical and
Biochemical Research, 3(2), 130-134.
Types of internal controls. Finance & Accounting. (2021). Retrieved July 14, 2022, from
https://www.fa.ufl.edu/directives/types-of-internal-controls/
