Course Work On Inquiry Process Essay

Internal controls are important in detecting and preventing internal and external fraud. One of the objectives of an internal control system is to ensure the company assets are safeguarded from fraud, waste or other irregularities (Pfister, 2009, p 30). Internal controls are based on the concepts of segregation of duties, authorization limits and proper records or documentation of transactions. The internal controls also ensure physical security of the company assets. The detective internal controls include reconciliation of branch accounts and independent verification of transactions (Needles & Powers, 2010, p 264). However there are inherent limitations of internal control systems. They may not be able to detect or prevent fraud where there is management override or collusion among the employees (Hall, 2006, p 135). The manager may override certain procurement procedures to collaborate with suppliers to defraud the company. The company may end up paying for items that are fictitious. The employees may also work together to defraud the company. The person who should be checking that the transactions have been posted correctly may collide with the processor of the transaction to defraud the company. The effectiveness of the internal control system is therefore dependent on the integrity of the company officials.Course Work On Inquiry Process Essay

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Considering the inherent limitations of internal control system, the company would be better off investing in a third party fraud prevention company to oversee their operations. These third parties are more skilled at fraud detection and prevention since it is their core business. They would be able to use complex techniques and tools. Secondly, they would provide an independent review of company operations. Internal fraud department employees may be influenced or coerced as they report administratively to management. They may also frustrate the process if they lack integrity or trustworthiness. Overall, the company will be able to concentrate in its core business and allow the experts handle fraud risk in their operations.Course Work On Inquiry Process Essay