When assessing internal controls we generally have two key a

When assessing internal controls, we generally have two key areas where we may identify deficiencies: design and effectiveness. Class, how do the two of these issues differ? Would one concern you more than the other? Why or why not?

Solution

First of all, before answering this question we are required to understand as to What are Internal Controls.

Internal controls are the procedures or processes which are designed by an organisation\'s top management so that an organisation\'s operations are working effectively and efficiently.

Now, we are required to focus our attention towards the designing of internal controls in an organisation:-

Designing of internal controls takes a lot of time , money and efforts of the management of an organisation because, these internal controls will work as pillars in the overall operations success of an organisation. If these controls are not designed properly, later on when these controls will be tested, it will be difficult for the management to assess the extent to which the requirements and guidelines of these internal controls are followed.

The main objective of developing or designing internal controls is to achieve objective of reliability of financial statements, compliance with the applicable laws and regulations, safegaurding an organisation\'s asstets (resources) and laslty effectiveness and effeiciency in organisation\'s operations.

Now, we are required to asess the deficiencies in the effecetiveness of internal controls:-

As we have seen that designing of internal controls is how much important. Same way the effectiveness of internal controls is important. If the internal controls which have been designed are working effectively, then the overall objective of using internal controls is defeated.