Company’s Bonding And Internal Control System

I will be inclined not to forgo a consideration of the internal control of a company due to bonding of the employees and officers of a company. Bonding is exclusively useful in indemnifying a company for losses that could constitute to financial ruin. The company can therefore protect itself from dishonesty by requiring the employees especially those that have access to the sensitive company data to be bonded, so to the officers.

Bonding is a way to reimburse a company for losses attributable to theft or embezzlement by bonded employees.  The request not to consider the system of internal control is entirely based on the assumptions that fraud might be the reason for auditing which stand to correct and clarify that fraud is not the reason for auditing the financial systems as a matter of facts bonding calls for regular audit procedures, theft or embezzlement by an employee so an officer in the company is an inherent element in system of internal control.

According to the SEC disclosure laws and regulations, the SEC requires disclosure of relevant company’s business and financial information to the potential investors; this is normally facilitated by auditing and at a large part in the internal control system. There is the requirement of reform auditing and accounting procedures including the internal controls. The request of foregoing consideration of the internal control due to bonding and auditing cost is geared towards the ideal of selective disclosure which is against the rules and regulation s imposed in 2000 by the SEC.

Considering the internal control has potential ramifications, among the auditing fee determinants is the bonding costs.  There could be an increase in the auditing costs as contemplated by the client.  Other ramifications could be the auditor’s conflict of interest like challenging the clients company’s accounting approach might damage t a client relationship placing a significant consulting arrangement at risk that may end up damaging the company’s reputation as well as the auditing firm’s bottom line. There can possibly be the ramification of security of analyst conflict of interest. Internal control has positive consequences; it will ensure that the financial reports are prepared in accordance with GAAP this will therefore give room for operational efficiency as well as an improved adherence to prescribed managerial policies will be encouraged.  Considering the internal control will also adjudicate that the company is complying with the applicable laws and regulations. It will thus permeates and company’s activities and provide reasonable rather than absolute assurance.

The perceived corporate governance of the company to the public could be with great doubt and concern upon considering the internal control against the company compliance. The internal control has preventive, detective and corrective controls. The detective controls might be associated with distinctive parameters that may not be appealing to the public as well as the potential investors of the company thus seriously affecting the perception of the public to the corporate governance of the company. The internal control is also associated with the general control measures that ensure the environment is stable and well managed. The call for adjustments of the environmental components might trigger the public curiosity about the corporate efficacy and adaptability; these might posses’ serious ramifications.

Share with your friends
Order Unique Answer Now

Add a Comment