What is the opinion or perspective on this idea of assessingrisk in the internal control process? (See paragraph below to getan idea or answer the question.) Please raise thoughtful questions,analyze relevant issues, build on ideas, synthesize across readingsand discussions, expanding the perspective, and appropriatelychallenging assumptions and perspectives.
Significance of assessing risk in the internal control process:In chapter 3, we learned that the purpose of the internal controlprocess is “to provide reasonable assurance regarding theachievement of objectives relating to operations, reporting andcompliance.” (Page 38, paragraph 3). One component of the internalcontrol process is “Assessing Risk,” which requires an organizationto determine, analyze and mitigate the risks inherent in achievingits goals and objectives. Without identifying, understanding andalleviating the risks involved in accomplishing it mission, anorganization will both miss opportunities to improve operations andhinder its ability to achieve its goals and objectives.
According to our text on page 62, paragraph 3, “governmentsexist to protect the health, safety and welfare of its citizens;”to this definition, I would add the point that governments mustalso be as accountable and transparent as possible. For agovernment, therefore, assessing risks involves looking at theoperations which allow the government to achieve this mission andassessing the risks inherent in these operations. Once the risksare identified, it is helpful for the government to prioritizeresources so that the most significant risks are addressedfirst.
I work in the finance department of a Town, and the director ofFinance is continually looking for risks in our business processes.If any red flags are raised, she will work quickly to adjustbusiness processes to mitigate these risks. For example, we arecurrently working to reallocate or return a large portion ofdeveloper fees that were collected in the early 2000s. These feesare collected from developers to pay for the potential off-siteimprovements – such as road widening, or traffic lights – neededdue to the impact of the new development. By law, these off-siteexactions are to be returned to the payer if they are not used forthe intended purpose within 6 years. Through lack of internalcontrol –especially the component of assessing risk – the Townended up holding onto many of these fees passed the 6 yeardeadline. Recently, with staff turnover, the issue of the developerfees came up and the risk of holding onto these fees any longer –namely litigation, other legal troubles, and bad press – wasaddressed. We are now in the process of returning the developerfees that should have already been returned. Moreover, newprocesses were put in place to prevent this from ever happeningagain, including monthly reporting and better record keeping.
