Essay Sample on Internal Controls in All Streaks Restaurant

The effectiveness of management systems influences the achievement of organizational goals and objectives. The establishment of an efficient management system, therefore, is one of the preconditions for the realization of both short-term and long-term company goals. In this perspective, the existence of such systems is predictive of careful planning and adequate control of operations. However, reaching targets is a complex process owing to business dynamics. Managers, therefore, require reliable, well-timed, qualitative information as the basis of decision making. The establishment of internal controls supports the managers to achieve this goal. Internal controls, in this regard, enable the decision-makers to monitor everyday activities through policies and procedures that improve compliance to rules and regulations. Internal controls are useful monitoring tools, and therefore, managers should establish them to improve timely reaction to deviations from standards and organizational targets.

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All Steak Restaurant has effective internal control systems that guide everyday activities. After observing the organization's visible internal controls, I noted that the policies in place provide reasonable assurance on the realization of corporate goals. According to Rezaee (2002), efficient internal controls should support the managers to achieve organizational strategies and objectives in three categories. First, the reliability of financial reporting, which is critical in managing cash. Secondly, compliance with applicable laws and regulations to minimize legal costs. Thirdly, the effectiveness and efficiency of operations. Internal controls in All Streak Restaurant creates a controlled environment that promotes integrity and ethical values.

The organization has physical access controls designed to safeguard critical facilities and protect the assets of the organization. The systems in place prevent unauthorized access to inventories, stores, and the billing sections in the organization. As parts of the physical access controls, the company has designed badge swipe door locks to prevent malicious insiders from entering its premises. It also prevents unauthorized access to specific sections of the firm. Notably, All Streaks Restaurant has charts of operations that provides step-by-step guidelines on the implementation of everyday operations. It is a critical component of internal controls that serves to prevent deviation from the manager's standards and policies. The flow of activities and processes in All Streaks Restaurant is in the form of an operational chart in diagram 1.

The internal control structure of All Streaks Restaurant is beneficial to the organization, although it has weaknesses that negatively impact on the achievement of business goals and objectives. Similarly, its internal control structure has strengths that improve the efficiency of operations. First, the structure is clear and straightforward. This internal control, therefore, enhances transparency since the customers follow minimal procedures to acquire the organization's services and products. In other words, the system is free from a bureaucracy where the customers go through unnecessary processes to get the services.

Secondly, the internal control structure promotes the orderly and efficient conduct of business. This component outlines service procedures right from the reception of the guests to the final step that entails billing. Thirdly, it supports other internal controls such as the segregation of duties. The company's processes, therefore, are transparent since different employees are engaged in billing, taking orders, serving, and receiving the guests. Fourthly, the internal control structure in place supports the managers to maintain accurate and timely business records. The reason is that the system is simple. Thus, it enables the managers to reconcile the information from the different sections of the business.

Nonetheless, the internal control structure has weaknesses that negatively impact on the effectiveness of the systems in place. First, I observed that the system lacks an element of supervision and thus has a high tendency of inconsistent application. Its procedures are straightforward and have no supervisors to approve documents as the customers move from one step to another. This inconsistency increases the chances of fraud and irregularities. Secondly, improper acts can occur in the billing section and not detected. Dimitrijevic, Milovanovic, and Stancic (2015) argued that internal controls should support the developmental plans of the company. While it is necessary to implement successfully developed internal controls, these components may not resolve all the problems facing the organization.

However, non-existence or implementation of ineffective internal controls may trigger severe problems to the business. Dimitrijevic et al. (2015) cautioned managers against developing internal controls to remedy inappropriate strategies in their organizations. All Streaks Restaurant, therefore, should ensure its systems supports business goals and objectives. Since internal controls are not solving corporate problems, managers should regularly update these components to meet changes in the business environment.

The company, however, has proposed a different internal control structure, as shown in diagram 2. While this component is beneficial, it also has weaknesses, especially detecting fraud, errors, and other irregularities. The reason for the formulation of this structure, according to the managers, is to improve operational efficiency. Also, it enhances transparency and detection of fraudulent practices. These goals support the overall objectives of the company to establish cost-effective internal controls that enable the business to achieve its goals. In the proposal, All Streaks Restaurant plans to increase procedures, especially in the billing section of the company. Under the new system, the organization will have two sub-divisions of the billing unit. One part will be in charge of billing, whereas the other department will be close-checking receipts.

The strengths of the proposed internal control structure are beneficial to the customers and the organization. These components are a high capability to detect errors, prevent fraudulent acts, and improve transparency and efficiency of everyday activities. The reason is that the proposed system enhances the reconciliation of customer data from different units of the organization and thus minimizing the chances of frauds. However, the system also has weaknesses. Some of these aspects are a high cost of implementation, and high chances to slow down the speed and efficiency of operations. The reason is that it incorporates additional steps that may even discourage customers from visiting the restaurant. Its implementation is also costly since it requires more employees than the previous internal control structure.

The managers of All Steak Restaurant should improve the proposed internal control structure before its implementation. First, it is recommended that the company establish internal supervision to stimulate the achievement of strategic goals. The supervisory function, in this case, is necessary since the proposed structure has additional business units. Secondly, the business should formulate an internal audit department to ascertain the accuracy of records and the organization's financial information. The internal audit function is also necessary to maintain and recommend improvements to the systems in place.

Conclusively, internal controls are essential since it promotes the achievement of business targets and organizational goals. It encompasses policies and procedures that the management formulate to monitor operations and improve regulatory compliance. All Steak Restaurant, like any other organization, is determined to implement appropriate internal controls. The company has operational charts and structures that outline the steps that the employees and the customers ought to follow. All Steak Restaurant, however, ought to establish direct supervisory function. This component is necessary to prevent an inconsistent application of internal controls. Also, it ought to set an internal audit to manage the implementation of controls besides advising the managers about the systems in place.

References

Dimitrijevic, D., Milovanovic, V., & Stancic, V. (2015). The Role of A Company's Internal Control System in Fraud Prevention. E-Finanse, 11(3), 34-44.

Rezaee, Z. (2002). Financial statement fraud: prevention and detection. John Wiley & Sons.