Internal Control Paper

1536 Words Nov 1st, 2012 7 Pages
(1) Currently, more than forty percent of Fortune Global 500 changed from United States Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS); in virtually 100 countries, 12,000 corporations have opted to follow IFRS. As this standard is becoming globally accepted, the United States has been compelled to cooperate with IFRS. To portray the challenges involved, one large United States company, Clark Corporation, will be explored. At the close of the 2010 financial year, Clark Corporation’s external auditors strongly recommended that they prepare its financial statements using IFRS by January 1, 2012. However, Clark Corporation will encounter various challenges in migrating from depreciating …show more content…
Thus, the computer system should be modified in order to effectively manage the new reporting system accounts.
Not only does the system incompatibility pose a challenge, but also, the incorrect application of the rules creates a significant internal control challenge. A majority of accountants lack previous educational background with IFRS; therefore, there is a high risk of errors on the financial statements. The migration to the IFRS accounting information system can result in improper data management. The accountants will focus on upgrading processes to secure this more granular data; yet with their limited knowledge, it may result in a defective system. The auditor lacks understanding of how the company uses the Information Technology (IT) and how IT affects the financial statement. An auditor may apply the procedures improperly in the new information system resulting in detection risk, or “risk that the procedures performed by the auditor will not detect a misstatement that exists that could be material, individually, or in combination with other misstatements.” The unfamiliarity with the new depreciation method could lead to errors in the financial statements.
In addition to incorrect application of rules, Clark Corporation will encounter

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