INTERNAL CONTROLS

1.ABC Company is a small manufacturing company that produces electronic devices. The company has
recently experienced rapid growth due to increased demand for their products. As a result, they have
hired new personnel and implemented new information systems to handle the increased production.
However, the management team is concerned about the effectiveness of their internal controls in this
changing environment.

Questions:

1. How can the company ensure that their internal controls are cost-effective and able to adapt to the
changing situation?

2. What control activities should the company implement to minimize risks associated with the new
personnel and information systems?

3. How can the company prevent potential human errors and collusion within or outside the entity?

4. What measures can the company take to safeguard their assets and records in the face of rapid
growth and new technology?

5. How can the company ensure the reliability and accuracy of their financial reporting in light of the
changes they are experiencing?

6. What monitoring processes should the company put in place to assess the quality of their internal
control performance over time?

7. What are the responsibilities of management in designing, installing, and maintaining effective
controls?

8. How can the company identify and assess the risks associated with their changing environment and
respond to them effectively?

9. How can the company ensure that their internal controls comply with applicable laws, regulations,
and policies?

10. How can the company address the limitations of internal controls in a small entity, such as the lack
of separation of duties and reliance on management's assertions?

2.LMN Company is a multinational technology company that specializes in software development. The
company recently experienced a data breach that resulted in the unauthorized access and theft of
customer information. As a result, the management team is concerned about the effectiveness of
their information security controls and the potential impact on their reputation and customer trust.

Questions:

1. How can the company enhance their information security controls to prevent future data breaches
and protect customer information?

2. What control activities should the company implement to ensure the confidentiality, integrity, and
availability of their systems and data?
3. How can the company effectively monitor their information security controls to detect and respond to
potential threats and vulnerabilities?

4. What steps should the company take to ensure that their employees are aware of and comply with
information security policies and procedures?

5. How can the company assess the potential financial and reputational risks associated with data
breaches and develop appropriate risk responses?

3. PQR Company is a large financial institution that offers a wide range of banking services. The
company recently underwent a merger with another bank, resulting in significant changes to their
operations and systems. The management team is concerned about the potential impact on their
internal controls and the need to ensure compliance with regulatory requirements.

Questions:

1. How can the company assess the impact of the merger on their internal controls and identify any
control weaknesses or gaps that need to be addressed?

2. What control activities should the company implement to ensure the accuracy and reliability of
financial reporting in the post-merger environment?

3. How can the company effectively communicate and train employees on the changes in internal
controls resulting from the merger?

4. What measures should the company take to ensure compliance with regulatory requirements, such as
anti-money laundering and data privacy regulations, in the merged entity?

5. How can the company monitor the effectiveness of their internal controls in the post-merger
environment and make necessary adjustments as needed?