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It is imperative for companies to keep track of their financial positions. The size of the company determines whether the accounting systems will be complex or simple. An accounting system is a set of procedures, equipments, and records that deals with transactions affecting the financial position and performance of the entity. In order to ensure the consistency and accuracy of the accounting system, there needs to be an addition of another system. This additional system is usually referred to as internal control structure. The internal control system contains the controls that ensure the company’s processes are conducted in a logical and efficient manner. Therefore, this paper aims at analyzing the internal controls for Apollo Shoes Company. It is important for the company to have these controls as they will ensure that the production of their goods and services is conducted in a procedural and understandable manner (Chorafas, 2001).
Internal Control Options
Internal reporting options are fundamental in ensuring that the employees, investors, and regulators are always updated on the financial operations. The options put in place should take into account the type of controls the organization has and how they usually operate. Companies implement the following options for internal reporting: document management and work flow tools, data-mining tool, real-time compliance tools as well as generic tools. These tools keep financial practices in conformity with federal regulations (Chorafas, 2001).
Generic tools usually provide an essential level of compliance at specific points in time. However, their protection is limited. These tools can be updated automatically if the software is customized to do so. The Apollo Shoes company can use these generic tools to help in running internal control systems to protect the systems and to help in recovering information in case of disaster. However, generic tools are not meant for specific business activities, they could be applied for different practices (Chorafas, 2001).
Management of Documents and Workflow Equipment
They are constructed to be used along with accounting software. They provide information to manage workflow through predefined rules. Documents are labeled to simplify information access. The separation of processes and the analysis of major work duties and their relationship is also possible with these tools. Apollo Shoes can use the tools to assess controls and risks and update them to the required standards (Chorafas, 2001).
Tools of Real-Time Compatibility
These tools can be used with other software by the shoe company as a source of data. The information will then be used to formulate quality and consistent processes. They will also raise alarm to management in case of faults and give relevant information on time. These will make Apollo shoes respond to changes in the business environment in the best manner possible (Chorafas, 2001).
Mining of Data
Mining of data involves recovery of files and development of trends. The software uses these sources of information to get data for analysis. The management will be able to identify the financial trends in the firm and compare them with the expected trends. The tools analyze the variables to know their effects if applied. Apollo shoes can adopt these tools to its financial systems to help cut costs.
Controls for IT
Access controls explain how the firm manages its IT resources and their usage. They include user accounts which have a username and a password. The user logs in to access the resources. Access controls provide the access of data to only few privileged people with system accounts.
To use access controls, workers in a company must have their authentication codes. Users have particular user identification number and password to reach all the online resources and networks in the systems. This is a way to secure the firm’s information from competitors and hackers. This is done by creating one central system of authentication that helps get information easily from the operating system. An organization can have more than one operating system (Chorafas, 2001).
There are some elements for user identification codes such as the following. It should have a relationship with personal information. This makes it easier for employees to recall their personal identifications on the network. To provide uniqueness, employee numbers and initials should be used. This locks out any unauthorized users. User IDs should be applicable for not more than three months. They should be changed or disabled for security purposes.
The password should have at least six characters, consisting of letters and numbers. The password should be altered every two months. The username and password enable users to access information. Users are responsible for activities of their passwords, and therefore, they should not be shared. For users to access more information, they should have permission from the manager (Chorafas, 2001).
For new employees, the IT group creates a new account by considering their identification numbers and names. Details about the period of employment and work schedule are also required to create a new user account for the employee. To delete an account, the account is disabled for a month before being deleted (Chorafas, 2001). Other access controls include: remote access for employees who are not at work, entitlement reviews for those employees who have been shifted within the company, the creation of privileged system accounts and intrusion detection, and firewall systems (Chorafas, 2001).
Evaluation of the Internal Control Options
The criteria of evaluation will depend on the efficiency, accuracy, speed, and durability of the internal control tools and systems. The Apollo Shoes company should adopt these access control tools because they are well-developed and have been tested to work efficiently within an organization of its kind. The controls can be evaluated through their working capability over long periods of time in different firms (Chorafas, 2001). They are, therefore, effective tools to be adopted by Apollo Shoes, Inc. They will help in regulating and controlling the procedures and transactions done by the IT department. There will be no risk of unauthorized log in and the workers will also have adequate access to company resources at any time. Data entries will also be accurate and timely. These internal control systems are also long lasting as long as the rule of changing passwords in time is observed (Chorafas, 2001).
Data Processing Electronically
1. Separation of Duties
The IT department is separate from the accounting department though there is a flow of information between the two. The personnel policies in the IT department also include procedures like check reference, duty rotation, and security statements (Chorafas, 2001).
2. Procedure control
The IT department uses controls in its procedures. The users are not allowed to enter any unauthorized information into the system. The input data is also assessed and processed to ensure the absence of errors. On-line systems are used to check the system to avoid multiple entries of data and input data is only done in the IT department (Chorafas, 2001).
In conclusion, the Apollo Shoe company can improve its efficiency and productivity by adopting these internal control systems. This is because the control systems will help in securing most transactions and information. Employees will also enjoy easy access to company resources without the risk of unauthorized people obtaining some crucial information.