Internal Control Environment Analysis

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Internal control plays an important role in accounting. According to the Committee of Sponsoring Organizations (COSO) Internal Control-Integrated Framework, internal control is define as a process affected by an entity’s board of directors, management and other personnel which designed to provide reasonable assurance regarding the achievement of objectives in effectiveness and efficiency of operations, reliability of financing reporting and compliance with applicable laws and regulations. Through internal controls’ policies and procedures, management can acquire reasonable assurance that the company follows the procedures in accordance with achieving its objectives and goals. A poor internal control procedures might result in a company’s failure.…show more content…
We must review five components of internal control in COSO’s Internal Control Integrated Framework in order to explain the failed internal control and governance within Barings. The five internal control components consist of control environment, risk assessment, control activities, information and communication, and monitoring. (Committee of Sponsoring Organizations of the Treadway Commission, 2013) . Control environment is a foundation of all others internal control components. The other four components will be or most likely to be jeopardized if a company does not holding a strong control environment. Control environment is related to the attitudes, actions, policies and management style of an organization. It refers as a tone that set by organization as a model for the employees to comply with and follow. Strong control environment build a positive working environment because it mean every tasks are well control and managed. We can have a further deepen analysis in this…show more content…
Barings put too much trust on Leeson which allow him to involve in the activity in both front and back office. They never suspect there might be a chance for the employee to behave unethically if they get the chance. The human resource policies are too loose. This gave a chance for Leeson to have too much autonomy in the daily operations. This might advocate Leeson to behave unethically in order to get his own interest. The human resources department should always evaluate the behavior and performance of the employees to trace the abnormalities of the

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