Accounting Internal Controls Finance Case Assignment (Case Study Sample)
CASE STUDY - You will complete a 2-page case study. Use current APA formatting with a title page, running head, and at least 2 sources in a reference list. No abstract is needed for this assignment.
CASE: On January 1, CBU installed a new computer system for tracking and calculating inventory costs. On December 31, at years-end closing, CBU's system reported inventory at $4.5 million for financial statement purposes. At midnight, the auditors performed a physical inventory count and found the inventory total to be $3.5 million. To correct the discrepancy, CBU's accounting staff processed an adjusting entry to reduce inventory by $1.0 million. The next day, 2 accountants were discussing the events of the previous night. Accountant A was proud of the audit and said it illustrated a benefit of having a good system of internal control. CBU had followed good internal control procedures by having a regular physical inventory count to safeguard a valuable enterprise resource. Accountant A was relieved that the problem was resolved: the financial numbers were corrected before they were reported. In short, he felt successful and thought CBU should feel fortunate to have his accounting staff as control advisors. Accountant B felt differently. She was concerned about the bad decisions that were made throughout the year based on the incorrect inventory numbers. She felt that she and the other accountants should have helped develop more timely and effective system controls.
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?
***Your response should also include a Biblical perspective.
Case Study - Accounting Internal Controls
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 pro
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