INTERNAL CONTROL

ASSESSMENT
Romlan’s Furniture
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL

I. Introduction
The concept of risk management is gaining attention not just in business
and management firms but also in academe. While academe teaches the
methods of risk management as well as factors affecting risks, very little have
been using it as for their own assessment. Most of academic institutions have
been established for many years, but some of them still uses the system of
instruction, authority and communication that is no longer applicable or
working in 21st century.
Risk management is basically an approach in which we explore identify,
analyze and mitigate the risks that can affect our project. Risk management is
an important part of project management which if done efficiently leads to the
success of your project (Majeed, 2018)

II. Purpose
The purpose of this Internal Control Assessment is to evaluate and analyze the
performance, productivity and competitiveness of Romlan’s Furniture. The risk
assessment provides data from questionnaires and observations of the assessor
regarding the production, processes and environment of the business.

III. Scope
The scope of this internal control assessment assessed the business
productivity, efficiency, processes and procedures and its associated risks to
eliminate and manage its vulnerabilities caused by its threats external, and
internal.
IV. Background of the Business
Romlan’s Furniture was established in 2011 by Romlan R. Durano. It is first
just a family hobby rather than a business, however due to the continuous
demand of its customers, it has become a legitimate business by the Durano
Family. It has been operating for nine (9) years now and still going strong in
delivering high quality furniture in the city.

Mission
Build a product with the highest quality, making everyone’s home a
better place.

Vision
Providing comfort, quality, and modest pieces of furniture inside
everyone’s homes.
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL

V. Interview Guide or Internal Control Questionnaire

Control Environment
1. Demonstrate Commitment to Integrity and Ethical Values
2. Exercise Oversight Responsibility
3. Demonstrate Commitment to Competence
Risk Assessment
4. Define Objectives and Risk Tolerances
5. Identify, Analyze, and Respond to Risks
6. Assess Fraud Risk
7. Identify, Analyze, and Respond to Change
Control Activities
8. Design Control Activities
9. Implement Control Activities

Monitoring
10. Perform Monitoring Activities
11. Evaluate Issues and Remediate Deficiencies

VI. Results and Analysis

Internal Control Assessment

Monitoring 4

Control Activities 3.25

FACTORS

Risk Assessment 3.8

Control Environment 4.5

0 1 2 3 4 5
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL
Based on the data collected, the controlling activities which involves
responses to objectives and its associated risks, and the designing of its
appropriate control activities are the weakest point in the business operations.
This means that they are unlikely to control the risk, if there are any. The
business needs to design policies, procedures, and techniques in aiding the risk
may occur impacting the business’s capital, human resources and its assets.
The utilization of control activities minimizes the effects and impact of the
risk. It is manifested through segregation of duties, verification, or the
performance planning and evaluation.

VII. Conclusion
Romlan’s Furniture has been in the furniture industry for nine years. It is
indeed a manifestation that the business has overcome the challenges and
problems in the past. However, as the time changes, the market structure,
demand and its business standpoint changes too. It calls for a tighter internal
control in the business to avoid or minimize the effects of risk that they’re
exposed to.

VIII. Recommendation
Among other factors controlling is still a vital part of the business. It aims to
not just control business processes in the business but also to assess, evaluate
and analyze potential factors that might affect its productivity, efficiency and
profitability of the business. This means that Romlan’s Furniture needs to
establish their own controls in doing their business.

IX. References

- Majeed, M. (2018, October 16). Risk Management: An Important Part of

Project Management. Retrieved November 10, 2020, from https://project-
management.com/risk-management-an-important-part-of-project-
management/
- Franklin, M., Graybeal, P., & Cooper, D. (2018, July 24). Define and
Explain Internal Controls and Their Purpose within an Organization.
Retrieved November 12, 2020, from
https://opentextbc.ca/principlesofaccountingv1openstax/chapter/define-
and-explain-internal-controls-and-their-purpose-within-an-organization/
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL
Evaluation the factors below using the 5 to 1 scale, where 5 means Completely Agree and 1 means Completely Disagree

Section 1 – Control Environment

1 - Demonstrate Commitment to Integrity and Ethical Values

Assessment Factor Indication of Controls 1 2 3 4 5

Management establishes standards of conduct to communicate expectations
a) Standards of conduct.
concerning integrity and ethical values.
Management establishes processes to evaluate performance against the entity’s
b) Adherence to standards of conduct.
expected standards of conduct and evaluates adherence to the standards of conduct.

2 – Exercise Oversight Responsibility

Assessment Factor Indication of Controls 1 2 3 4 5

There is an oversight body that oversees operations, provides constructive feedback to
a) Oversight structure. management, and informs decision-making to ensure that objectives are met and in
alignment with the entity’s integrity and ethical values.

3 – Demonstrate Commitment to Competence

Assessment Factor Indication of Controls 1 2 3 4 5

Management establishes responsibilities and expectations that are clearly defined in

a) Expectations of competence.
writing and communicated as appropriate.

b) Recruitment, development, and Management recruits, develops, and retains competent personnel to achieve desired
retention of individuals. objectives.
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL
Assessment Factor Indication of Controls 1 2 3 4 5
Management defines succession plans to address the need to replace competent
c) Succession and contingency plans and personnel over the long term, as well as contingency plans to address the need to
preparation. respond to sudden personnel changes that could compromise the internal control
system.

Section 2 – Risk Assessment

4 – Define Objectives and Risk Tolerances

Assessment Factor Indication of Controls 1 2 3 4 5

Management defines objectives in specific and measurable terms to enable the design
a) Definition of objectives.
of internal control for related risks.
Management defines the acceptable level of variation in performance relative to the
b) Definitions of risk tolerances.
achievement of objectives.

5 – Identify, Analyze, and Respond to Risks

Assessment Factor Indication of Controls 1 2 3 4 5

Management has a process for analyzing risks, including both inherent and residual
a) Identification of risks.
risk, and considers internal and external risk factors.
Management has a process to estimate the significance of the identified risks and their
b) Analysis of risks.
effect on achieving the defined objectives.
c) Response to risks. Management has specific actions to respond to the analyzed risk.
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL
6 – Assess Fraud Risk

Assessment Factor Indication of Controls 1 2 3 4 5

Management considers the types of fraud that can occur (e.g., fraudulent financial
a) Types of fraud. reporting, misappropriation of assets, corruption), as well as other forms of misconduct
(such as waste and abuse).
Management considers fraud risk factors (incentive/pressure, opportunity, and
b) Fraud risk factors.
attitude/rationalization) and uses this information to identify fraud risk.
Management performs a risk analysis to identify fraud risk and responds to fraud risk so
c) Response to fraud risks. they are effectively mitigated.

7 – Identify, Analyze, and Respond to Change

Assessment Factor Indication of Controls 1 2 3 4 5

Management identifies significant changes to internal and external conditions that
a) Identification of change. have already occurred, or are expected to occur, and that could significantly impact
the internal control system.
Management analyzes and responds to identified changes and related risks in order to
b) Analysis of and response to change.
maintain an effective internal control system.

Section 3 – Control Activities

8 – Design Control Activities

Assessment Factor Indication of Controls 1 2 3 4 5

Management designs policies, procedures, techniques, and mechanisms in response to
a) Response to objectives and risk.
the program office’s objectives and risks to achieve an effective internal control system.
Management designs appropriate types of control activities (i.e., management of
b) Design of appropriate types of control
human capital, physical control over vulnerable assets, access restrictions to records,
activities.
etc.) for its internal control system.
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL

9 - Implement Control Activities

Assessment Factor Indication of Controls 1 2 3 4 5

a) Documentation of responsibilities
Policies exist that document the control activities utilized by the office.
through policies.
Management periodically reviews the control activities for effectiveness.
b) Periodic review of control activities.

Section 4 – Monitoring

10 – Perform Monitoring Activities

Assessment Factor Indication of Controls 1 2 3 4 5

Management monitors the internal control system through on-going monitoring and
a) Internal control system monitoring.
periodic separate evaluations (e.g., self-assessments, audits).
Management evaluates and documents the results of on-going monitoring and
b) Evaluation of results.
separate evaluations to identify internal control issues.

11 – Evaluate Issues and Remediate Deficiencies

Assessment Factor Indication of Controls 1 2 3 4 5

Management and personnel identify internal control issues and report the issues
a) Reporting of issues.
through established reporting lines on a timely basis.
Management evaluates and documents internal control issues and determines
b) Evaluation of issues.
appropriate corrective actions for deficiencies.
Management completes and documents corrective actions to remediate internal
c) Corrective actions.
control deficiencies on a timely basis.
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL