Audit Plan 2: Business Environment RNS SNHU

Audit Plan 2 Business environment RNS SNHU Audit Plan The purpose of this audit is to examine the internal controls that are employed by Robbins Networking Solutions so as to determine the extent to which they are effective. In this case, an auditor is required to determine the level at which other tests must be performed so as to arrive at an opinion in regard to the entity’s financial statements. This audit plan is aimed at providing guidance on the procedures to be followed in evaluating the internal control system at RNS to communicate any weaknesses to those charged with governance. RNS internal control system on the company’s financial reporting is not effective since it does not provide a reasonable assurance about the preparation of financial statements and the reliability of financial reporting for external purposes.

Paper For Above instruction

The ongoing necessity for robust internal controls within organizations is paramount to ensure accurate financial reporting and compliance with accounting standards. Robbins Networking Solutions (RNS) presents a case where internal control systems currently lack effectiveness, raising concerns about the reliability of its financial statements. This essay explores the evaluation of RNS's internal controls, identification of associated risks, and recommendations for strengthening its control environment to enhance financial accuracy and stakeholder confidence.

Understanding the Company Context and its Risks

RNS operates within the highly competitive technology industry, primarily selling and installing computer hardware, networking equipment, and providing consulting services. Its pursuit of developing proprietary networking software signifies strategic innovation; however, it also introduces specific operational and financial risks. The company's business risks are primarily centered on financial risks due to extended credit periods granted to higher credit risk customers. Such practices can increase the likelihood of bad debts, impacting cash flow and profitability. Additionally, competitive threats through predatory pricing strategies could erode market share and revenues. The company's dependence on rapidly evolving technology markets magnifies the importance of effective internal controls to mitigate errors, fraud, and operational lapses.

The Role of Internal Controls in RNS’s Industry

Effective internal control systems encompass applications, hardware, physical safeguards, and online access controls. Application controls, which include data validation and processing integrity, are vital in ensuring transaction accuracy for the company's sales and financial reporting activities. Hardware controls help detect and prevent equipment failures, while physical controls restrict unauthorized access to sensitive information and assets. Online access controls, such as unique user IDs and passwords, are crucial in preventing unauthorized data alterations, thereby safeguarding financial information.

Assessment of Current Control Environment and Weaknesses

The assessment indicates that RNS's internal control over financial reporting is inadequate. Potential weaknesses include insufficient segregation of duties, lax access controls, inadequate transaction documentation, and poor oversight of credit policies. These weaknesses may lead to misstatements, fraud, and ineffective detection of errors. The lack of effective internal controls particularly compromises the reliability of financial statements, which is critical for decision-making by management and external stakeholders.

Recommendations for Enhancing Internal Controls

To address its internal control deficiencies, RNS should implement several key improvements:

• Strengthening Application Controls: Implement automated validations and reconciliation procedures to prevent input errors.
• Enhancing Hardware and Physical Controls: Restrict physical access to financial data and server rooms with security badges and surveillance.
• Improving Online Access Controls: Establish strict password policies, multi-factor authentication, and regular access reviews.
• Segregation of Duties: Ensure consequential segregation between transaction authorization, processing, and review functions.
• Regular Monitoring and Internal Audits: Conduct periodic internal audits and continuous monitoring to identify control gaps and rectify them promptly.

Implications for External Audit Procedures

Given the identified weaknesses, auditors should design substantive and control testing procedures aligned with the risk profile. Increased focus on controls surrounding revenue recognition, receivables, and cash collections is essential. Sample testing, walkthroughs, and re-performance procedures can validate the effectiveness of controls post-implementation. The auditors should also recommend that RNS strengthen its documentation practices and perform ongoing risk assessments to adapt to evolving control needs.

Conclusion

Effective internal controls are fundamental to reliable financial reporting, especially in dynamic and competitive industries like technology. RNS's current deficiencies necessitate a comprehensive overhaul of its control environment, emphasizing automation, access restrictions, and oversight. Strengthening these controls will not only improve the accuracy of financial statements but also foster stakeholder trust and support strategic objectives. As auditors, continual assessment and communication of internal control improvements remain critical components of the audit engagement to ensure that RNS's financial reporting achieves a high standard of integrity and compliance.

References

• Cooper, D., & Schindler, P. (2014). Business Research Methods. McGraw-Hill Irwin.
• Gelinas, U. J., Sutton, S. G., & Wier, B. (2016). Accounting Information Systems. Cengage Learning.
• Hammersley, J. S., & Trotman, K. T. (2020). Internal Control. In Auditing and Assurance Services (16th ed.). McGraw-Hill Education.
• Kinney, W. R., & Ramamoorti, S. (2013). Internal Control: Guidance for Risk-Based Assurance. The Institute of Internal Auditors.
• Moeller, R. R. (2013). COSO Internal Control-Integrated Framework. John Wiley & Sons.
• Ugbogbo, S. (2016). Ethical issues in information technology- A conceptual approach. Igbinedion University Journal of Accounting, 2.
• Walton, P. (2009). Financial Statement Analysis: An International Perspective. Cengage Learning.
• Singleton, T., & Singleton, A. (2010). Fraud Auditing and Forensic Accounting. John Wiley & Sons.
• Shrieve, K., & Nair, L. (2018). Enhancing Internal Control Systems in Technology Companies. Journal of Information Systems, 32(4), 45-59.
• Yellow Book. (2022). Government Auditing Standards. U.S. Government Accountability Office.