Accounting Internal Controls Finance Case Assignment

Case Study - Accounting Internal Controls
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With which accountant’s philosophy do you agree? How can you explain the diverse opinions? What policies or procedures, if any, should CBU develop to avoid such problems in the future? Accountant’s philosophy
Accountant A was relieved that the internal controls were appropriate and played his role in attestation that the financial statements were accurate. The aim is to ensure that the financial statements represent a true and fair view of the company’s financial position. The auditors need to be independent and unbiased as they examine the inputs, outputs and processing of the information system (Senft & Gallegos & Davis, 2012). The Accountant’s philosophy is right in that his role extends to verifying the accuracy of financial records. Nonetheless, the accountant was not a control advisor or consultant.
Accountant B had a different view since bad decisions may have been made because of the failure to detect the inventory error. She is concerned that the internal controls are not as strong as previously thought, and this would require risk and control review of the client’s accounting system to determine the risks and purpose controls to address these risks. It is as though she would provide professional business services other than being an independent auditor. Accountant’s B philosophy is the correct one since she would likely inform the auditors about other risks encountered in the inventory system. This would improve business process operations as less time is wasted trying to reconcile the inventory discrepancies.
The gross profit had been understated by $ 1 million because of the closing inventory/stock discrepancy. It also saves time for the company when more timely internal control systems are created. The $ 1 million inventory costs difference is material that it cannot be ignored that there could be errors in other accounts. Accountant A is only concerned that the inventory and profit and loss account reflect the right figure, but even the CFO is likely to ask questions on what led to the account ...