Answer to Question #127178 in Accounting for dolma

Question

describe how the statement of financial performance shows if the internal controls implemented are working?

Answer 1

Internal controls are the processes, procedures, and rules administered by an organization or business to guarantee that the financial and accounting information presented are honest, enhancing responsibility and fraud prevention.

Financial performance on the other hand is the general measure of a company’s overall financial stability and soundness over a particular period. Information from this is used by stakeholders and analysts to compare related firms in the same industry.

The financial statements of a company are used to gauge its performance, and they pass through various internal controls and processes before they are presented. Viability of financial performance is represented by proper implementation of internal controls. Strong internal controls will help an entity achieve proper performance and profitability targets including prevention of loss of resources. They ensure that the business complies with various laws and regulations and dependable financial reporting. When the financial performance shows inaccurate financial statements, missing documentation, lack of procedures, massive losses and frequent complaints from stakeholders, this will be an indication of weakness in internal controls, which are not working.