Assignment Description

You will be assigned one area of found in financial statements (e.g., cash, accounts receivable, revenue, accounts payable, etc.), or an activity related to accounting system activities (e.g., processing accounting transactions or preparing financial statements). Given your assigned topic, you will 1) write a paper addressing the importance of internal controls for your assigned area or activity, and 2) write a process narrative memo. When you receive your assigned topic, email your instructor to acknowledge that you have received the email.

Students often identify internal controls with efforts to detect or prevent fraudulent behavior and activities, but internal controls are about much more than just preventing fraud. In your paper, do not limit your thoughts and comments only to fraud. Keep the definition and purposes of internal controls in mind when you write your paper! Be sure to consider the five financial statement assertions when preparing your paper and addressing the six items below. Be sure to read the article "What are Financial Statement Assertions". Chapters 1, 3, 4, 5, and 6 of the SUA Reference book conclude with discussion of internal controls for each chapter's topic. You may find it helpful to incorporate material from the SUA Reference book when you write your paper.

Read the two articles posted in Week 2 in Moodle to get you started on things to think about when preparing your paper. Don't hesitate, also, to use the Walsh library or the Internet to find books or articles on internal control. You may use your SUA materials or textbooks from other classes you've taken at Walsh.

Part 1 - Paper

Your paper must address:

1. The definition of internal controls and why they are important
2. Who in an organization is responsible for establishing and maintaining internal controls
3. How internal controls should be communicated to individuals and parties affected by the internal controls, i.e., accounting personnel, auditors
4. What might the consequences be if internal controls for your assigned area are weak or fail. Think about what could go wrong if internal controls are not adequate. Provide a very specific example! Think: security turnstile debacle!
5. What financial statement assertions affect your assigned area for this project? In what respect?
6. When (i.e., how often) internal controls should be reviewed

Part 2 - Process Narrative Memo

A process narrative memo is a written description that a manager or auditor would use to gain an understanding of an accounting process or cycle. Think of a process memo this way: If you were to sit down and explain to an auditor how transactions are processed for your assigned area, what would you tell them? The process memo can be relatively informal and casual in tone; it doesn't have to sound extremely technical. However, you also should not use slang or clichs. An example process memo from the AICPA's website for a revenue cycle is provided in Week 2 as guidance to prepare your narrative process memo. Note: A process memo is not simply an explanation of internal controls, but it should identify the internal controls used in the process that is the subject of the memo.

1. The body of your paper should be 500 - 1,000 words.
2. Include a reference page that lists resources you used to prepare your paper.