Analysis of a System of Checks and Balances

A system of checks and balances must be created to minimize the opportunities for unethical behavior instead of putting related responsibilities in the hands of one or few employees only. For example, a sales associate rings up customer purchases, while an accountant balances the books to ensure that all payables are received and documented. An annual auditor is then employed to verify established procedures are being followed and develop new policies to address any unique situations that arise during the year. The manager of company should take the methodical approach to analyse the anomaly. In checks and balances essay one approach which can be considered is detailed.

Establish the objective 

The objective of the research must be clear as this will enable decisions to be made about the best way forward.

Identify the systems and procedures 

Undertaking a systems and risk analysis, and comparing the laid-down systems and procedures that should have been in place with those actually in use, can help to identify system or procedural failures.

Establish the scale of the risk

This involves identifying the potential loss and assessing whether it is material. Actual losses should be identified where possible.

Situation analysis

Background research, such as company searches, and identifying those involved.

Analyse all available data

Analysis of all the data will give an understanding of what has occurred and how it occurred.

Prepare schedules

Graphical and numerical schedules/spreadsheets should be prepared to support the analysis and findings.It is important to make it as easy as possible for those with little or no financial knowledge to understand what has occurred. These, when consolidated, would be in the form of an audit pack detailing the documents that have led to the formulation of the conclusions.

Prepare the report

In preparing the report it is important to bear in mind that, whatever the original objective, there is always the possibility of it being used in evidence at some form of legal proceedings. The report should be factual as far as possible, and where opinion is given, it should be clearly identified as such – for example, professional opinion used in the conclusions of the report.

Conclusion

All of the prevention tools and techniques will not grow to their full potential of uses in identifying the irregularity, but to be effective they must be combined with a methodical approach to the analysis of the problem identified.A fraud investigation or internal management review is then set up after the analysis of a problem to decide whether such a review should be carried out.