Easy Clean Case 5.2 Essay

706 Words Nov 13th, 2014 3 Pages
Case 5.2: Easy Clean Co.
Internal Control Over Financial Reporting
Component Evaluation- Control Environment
Demonstrates Commitment to Integrity and Ethical Values
Rating: 3
Present: Yes
Functioning: No
Internal control deficiency description:
No written code of conduct or formal ethical standards
No processes in place to evaluate employees ethical standards
Tone at the top is minimal, with Doug and Phil appearing to have integrity, they work hard and stay late and the business is growing via “word of mouth”
Lack of formally reported goals and values
However, “open door policy” is a good supporting communication line
Sales people being paid on commission and negotiating special prices needs ethical values to keep employees
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Day is given all accounting duties
No budgets prepared
Lack of protection for accounting records
However, owners and Mr. Day are highly involved, and the engagement of CPA’s for an audit shows responsibility.
Compensating Controls:
A lack of true BOD oversight to help establish authority and structure
A lack of ethical values can reflect in a lack of consideration of all structures of the entity
A Major Deficiency: No

Demonstrates Commitment to Competence
Rating: 6
Present: Yes
Functioning: Yes
Internal control deficiency description:
Office employees experience confusion regarding their job duties and responsibilities
No formal job descriptions have been developed
However, there is formal training and little employee turnover
“Open door policy” helps with retention and resolving issues
Phil and Doug also address problems and shortcomings at monthly meetings
Compensating Controls:
Having stronger responsibilities and structure established could help increase the commitment to competence.
A Major Deficiency: No
Enforces Accountability
Rating: 3
Present: Yes
Functioning: No
Internal control deficiency description:
Management does not formally specify goals
There are no set internal control objectives to achieve or monitor
There are no performances measures of

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