Internal control is the best alternative which should be implemented to avoid the problems which are occurring to WorldCom. Its benefits can be clearly identified even from its definition. It ensures adherence to company policies and procedures, promote operational efficiency, minimize errors and theft and enhance the reliability and accuracy of accounting data. In other words, it is a preventive measure since it helps in ensuring that all the regulations are followed. It will ensure that the correct procedures are followed in doing everything. It will ensure that the activities, policies and plans of WorldCom are formulated in a way that they meet the company’s goals hence there will be no need for fraud as everything will be as expected. By implementation of internal control, mismanagement will be avoided and all activities carried out will be in accordance to the law hence all the financial information will be efficient. Above all other alternatives, (Rittenberg, 2009) it will increase accountability and reduce falsifying of accounting information. Since it will ensure that each department has its own responsibilities, it will be able to easily identify which department is causing problems. It is the best if appropriately implemented because it can lead to effective running of the business.
It is important to implement internal control system using the following procedure; all responsibilities should be clearly stated to avoid overlapping of duties, the duties should be clearly separated to be able to know who should bank money, who should record the incoming funds to ensure that incase the records are not correct; the one responsible is identified (Weygand, 2010). The accounting records should remain confidential and unauthorized persons should not access it. There should be only specific person who is responsible for writing checks and deposit slips. A check form should be available to be completed when a check is required and the directors should look at it before a check is written. Set out an operational internal audit committee consisting of members with financial and business knowledge. The audit committee will be charged with the responsibility of reviewing the financial records from time to time to check for misappropriation of funds and ensure that the law is being followed.
Internal control will have various positive outcomes to an organization when implemented as it ensures effective running of the business. It will ensure that the resources of the company are used for the rightful purposes which ensure that no resources are misused. If the internal control is implemented, the employees will be saved from any blame due to mismanagement or fraud (Weygand, 2010). It helps in saving both resources and assets, identifying irregularities early enough to allow correction, identifying the operations of high priority and saving cost since the business is effective.
However it has its own negative outcomes because if it is not properly executed, it can lead to frustration on the side of the employees. If the internal control system is not flexible for easy adaption, the issue of sustainability can be a problem. Another very potential disadvantage of implementing internal control system is that, the auditor of the company may relax and depend too much on the internal system and fail to use other method of monitoring fraud and mismanagement (Weygand, 2010). It can only be designed for routine transactions and is operated by people so there is a probability of human error. Due to changes in procedures, internal control systems need to be updated from time to time to avoid being ineffective.
References
Rittenberg, L et al. (2009). Auditing: A Business Risk Approach. South Western, Cengage Learning Inc
Weygand, J et al. (2010). Financial Accounting. United States, Aptara Inc.