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Assignment Sample- Implement and Maintain Internal Control Procedures

21913Downloads1 I Published: 16 Oct ,2018


Ethical trading is the prominent aspect which is considered by each corporation while completing all their business activities. It covers vast areas such as corporate governance, operating procedures and effective monitoring of imposed policies. Present report is based on Ethical Trading Group which is distribution company deals in ethical brands (Ethical Trading Group, 2017). It is operating ht market through retail channels, wholesale and import. Further, corporate governance requirements are reviewed by keeping into account policies and procedure. Similarly, operation procedure such as ethical trading group policies are procedures are implemented. In addition to this, different operating procedures are monitored with the use of appropriate procedure.

Reviewing corporate governance requirements

The corporate governance deals with ethical conduct of business by keeping proper accounting record related to business for specific financial year. At this juncture, Internal Audit and Compliance team put efforts to conduct the independent review so that accordingly procedure and operation of organization can be apprised (Sherman, 2017). With the help of their review management come to know about various system of control and procedure which are being applied in Ethical Trading Group. Here, following three ethical requirements are compiled by business-

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Identifying three examples of ethical requirements

  • Authority and responsibility
  • Independence
  • Confidentiality

Analyzing and describing impact of each ethical requirement on daily operation of Ethical Trading Group

  • Responsibility and authority related to comprehensive internal audit program. At the same time, audit team must keep the management inform regarding matter of significance and other related unusual transaction.
  • Independence reflects that audit team cannot directly review the operation and activities of business. However, they consult regarding new procedures and system with management of Ethical Trading Group for effective internal control (Financial Transaction Reports Act, 2017).
  • Confidentiality is the ethical requirement for audit committee under which need to keep into mind that all information must be recorded with confidentiality and no any information will be disclosed without authority (Lenghel, 2013). This helps Ethical Trading Group to follow the structured process of record keeping an ethical manner.

Recognized sources

There are different sources of such online articles, books and journals. These sources are important for gathering information for developing deep understanding.

According to the audit procedure, management of Ethical Trading Group can follow the simple audit procedure for internal control. At this juncture, at first confirmation can be give under which team can review the financial statements on daily basis and ask audited corporation for giving confirmation. Further, inventory checkout is done on the basis of physical count with presence of internal audit team (DeFond and Lennox, 2016). However, it will take time but ease the audit procedure to maintain the higher level of performance. Furthermore, legal question can be prepared by corporation for false statements in the report. It would be effective for entire Ethical Trading Group to maintain the ethical aspect and carry out all business activities effectively.

Implementing operating procedures

The delegated authority schedule of Ethical Trading Group reflects that all expenses and other related task must be approved by responsible or authorized person. However, internal control procedure can be completed by considering following three actions-

  • All the capital expenditure incurred by Ethical Trading Group for acquiring capital or assets must be approved by chief financial officer at first (Cheng, Dhaliwal and Zhang, 2013).
  • All the employment contract of business must have pre-approval from chief financial officer.
  • Any kind of payment and cheques must be authorized of two signatories. It can be either both like joint managing director, chief financial officeer and Financial Controller of Ethical Trading Group (Clinton, Pinello and Skaife, 2014).

These above mentioned three actions would be effective to review and maintain financial delegations and accountability to ensure that internal control procedure can be completed effectively. It assists internal audit team to get proper record and accordingly overall performance of corporation can have assessed so as to ensure its ethical conduct in the marketplace.

Monitoring policy

The monitoring policies at Ethical Trading Group are compiled as follows-

1 Listing 3 actions to ensure successful application of Anti-Money Laundering and Counter-Terrorism Financing Measures (AML/CTF)

  • Record retention
  • Reports of suspicious transactions
  • Monitoring suspicious activities or transaction

Identifying, evaluating and describing the impact of three instances

Record Retention-It is the most important task under which record related to customers and suppliers are maintained for seven years (Ge, Koester and McVay, 2016). The same data is retained in Australia for seven years, hence if information is not provided and recorded properly then performance of Ethical Trading Group get hamper to a great extent.

Reports of suspicious Transactions-Regulatory authority must be reported by for any kind of suspicious transaction. For this purpose, procedures and policies must be complied so as to ensure ethical aspect of business in the marketplace. It can be critically evaluated in case corporation do not report for suspicious activities of suppliers or customers then profitability and performance go down (Cumming and et. al., 2015).

Monitoring suspicious activities or Transaction-Here, AML and CTF program can be implemented by completion this procedure of applying risk based approach, Here, period training and provided to staff and accordingly any kind of suspicious transactions are reported to authority. In case business do not follow such kind of practices then management will not be able to implement AML (Gütling and et. al., 2016).

Modification to comply with AML/CTF program

Record retention-Under this, management or internal audit committee must be responsible to handle the task related to record keeping. At the same time, it can be ensured that all data are transferred and preserved for seven years in Australia.

Reports of suspicious Transactions-Regulatory authority must be connected with online mode of communication so as to review all the transaction made by Ethical Trading Group. However, qualified and skilled team can be allotted this task to ensure successful operation of business (DeFond and Lennox, 2016).

Monitoring suspicious activities or transaction-All the activities of business must be supervised with suitable department or manager. This prove to be effective for corporation to assess the internal performance and accordingly directly give the report of suspicious transaction to responsible party. This can be made possible only with direct communication of such kind of information to related parties. This would be effective to implement the AML/CTF program and ensure wellbeing of business in the marketplace with increased rate of return (Cumming and et. al., 2015).

Identifying three examples of financial legislation related to taxable transaction and reporting requirements along their key features

There are several financial legislations which must be complied by management of Ethical Trading group for its successful operation in the marketplace. For example, Financial Transaction Act 1988 (FTR Act) which assists Ethical Trading Group to keep record related to significant cash transaction under section 7 of the same act. Furthermore, management might be punished for not following the requirement of stated regulation (Lenghel, 2013). Similarly, day to day transaction record are mentioned for the sake of assessing financial performance of calculating the tax.

Another example of Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Autonomous Sanctions Act 2011 can be taken under whereby Ethical Trading Group need to ensure that international standard on the basis of Australia are followed. At this juncture, these regulations are compiled by monitoring suspicious transactions and employees training program as well as record retention. In case of failure to maintaining all these aspects corporation might be sued for its unethical practices at the marketplace.

Identifying and explaining 3 principles of internal control and auditing

There are several principles of internal control and auditing which enables corporation to carry out all functions in an effectual manner. For this purpose, following principles are followed so as to ensure internal control and auditing in an effectual manner-

  • The responsibility of organization is to covers global activities such as human right practices and effective supply chain relationship. In this manner, track will be done over different operation activities of corporation (DeFond and Lennox, 2016).
  • Appropriate strategy should be implemented n order to ensure ethical purchase into existing management system. It proves to be effective to meet expectations of buyers and cater their need in an effectual manner.
  • All information must be recorded with confidentiality in order to meet expectations of all related stakeholders in an effectual manner. This proves to be effective for business to control the ineffective practices which are taking place at workplace and affecting overall performance of the business.

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This aids to cater need of all related stakeholders and accordingly competitive edge of the business can be created in the marketplace. Further, principles followed to internal control procedures are also important whereby corporation ensure to maintain ethical conduct of business with greater rate of return. In addition to this, different actions can be implemented by management of corporation so that accordingly all activities of firm can be managed in an ethical manner. Further, it can also be conducted that, imposed regulations and procedures are compiled by company so successful operation.


  • Cheng, M., Dhaliwal, D. and Zhang, Y., 2013. Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting? Journal of Accounting and Economics. 56(1).pp.1-18.
  • Clinton, S.B., Pinello, A.S. and Skaife, H.A., 2014. The implications of ineffective internal control and SOX 404 reporting for financial analysts. Journal of Accounting and Public Policy. 33(4). pp.303-327.
  • Cumming, D.J. and et. al., 2015. Venture Capital and the Disclosure of Material Weaknesses in Internal Control.
  • DeFond, M.L. and Lennox, C.S., 2016. Do PCAOB Inspections Improve the Quality of Internal Control Audits? Journal of Accounting Research.
  • Ge, W., Koester, A. and McVay, S.E., 2016. The Costs and Benefits of Section 404 (b) Exemption: Evidence from Small Firms’ Internal Control Disclosures.
  • Gütling, H. and et. al., 2016. The importance of selecting the right internal control gene to study the effects of antenatal glucocorticoid administration in human placenta. Placenta. 44. pp.19-22.
  • Lenghel, R.D., 2013. Internal Control Organization Procedure. Knowledge Horizons. Economics. 5(3). p.131.
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