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many years, but some of them still uses the system of instruction, authority and communication that is no longer
applicable or working in 21st century.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.

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
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL
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

Based
on the data
collected, 4
Monitoring
the
controlling
activities
which Control Activities 3.25
Factors

involves
responses
to Risk Assessment 3.8
objectives
and its
associated 4.5
Control Environment
risks, and
the
designing 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
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
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL
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 concerning integrity and
a) Standards of conduct.
ethical values.
Management establishes processes to evaluate performance against the entity’s expected standards of
b) Adherence to standards of conduct.
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 management, and
a) Oversight structure. 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 writing and
a) Expectations of competence.
communicated as appropriate.

b) Recruitment, development, and retention of

Management recruits, develops, and retains competent personnel to achieve desired objectives.
individuals.

Management defines succession plans to address the need to replace competent personnel over the long
c) Succession and contingency plans and
term, as well as contingency plans to address the need to respond to sudden personnel changes that could
preparation.
compromise the internal control system.
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL
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 of internal control
a) Definition of objectives.
for related risks.
Management defines the acceptable level of variation in performance relative to the achievement of
b) Definitions of risk tolerances.
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 risk, and considers
a) Identification of risks.
internal and external risk factors.
Management has a process to estimate the significance of the identified risks and their effect on achieving
b) Analysis of risks.
the defined objectives.
c) Response to risks. Management has specific actions to respond to the analyzed risk.

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 reporting,
a) Types of fraud.
misappropriation of assets, corruption), as well as other forms of misconduct (such as waste and abuse).
 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 considers fraud risk factors (incentive/pressure, opportunity, and attitude/rationalization) and
b) Fraud risk factors.
uses this information to identify fraud risk.
Management performs a risk analysis to identify fraud risk and responds to fraud risk so they are
c) Response to fraud risks. 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 have already occurred,
a) Identification of change.
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 maintain an
b) Analysis of and response to change.
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 the program
a) Response to objectives and risk.
office’s objectives and risks to achieve an effective internal control system.

b) Design of appropriate types of control Management designs appropriate types of control activities (i.e., management of human capital, physical
activities. control over vulnerable assets, access restrictions to records, etc.) for its internal control system.

9 - Implement Control Activities

Assessment Factor Indication of Controls 1 2 3 4 5
a) Documentation of responsibilities through
Policies exist that document the control activities utilized by the office.
policies.
 FATHER SATURNINO URIOS UNIVERSITY
ACCOUNTANCY PROGRAM
AUD 311 CORPORATE GOVERNANCE, BUSINESS
ETHICS, RISK MANAGEMENT AND
INTERNAL CONTROL
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 periodic separate
a) Internal control system monitoring.
evaluations (e.g., self-assessments, audits).
Management evaluates and documents the results of on-going monitoring and separate evaluations to
b) Evaluation of results.
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 through established
a) Reporting of issues.
reporting lines on a timely basis.
Management evaluates and documents internal control issues and determines appropriate corrective
b) Evaluation of issues.
actions for deficiencies.
Management completes and documents corrective actions to remediate internal control deficiencies on a
c) Corrective actions.
timely basis.