EssaysForStudent.com - Free Essays, Term Papers & Book Notes
Search

The Nature of Corruption

Page 1 of 5

Executive Summary

This report will analyze the cases demonstrated in the article (Wallach 2016) and come up with solution of continuous assurance to the corruption problems and propose recommendations to small entities for implementing continuous assurance in a cost-effective manner. The first part of the report will analyze the nature of the corruption including categories of people involved, causes of the cases, and related impacts. The analysis indicates that essentially, the small entities were exposed to unlawful manipulation of public assets at all levels because of the lax internal control. Subsequently, continuous assurance is introduced to address this problem through automatic monitoring supported by information technologies, like ERP software. Finally, considering the small organization and local government entities’ limited financial abilities, strategic assessing method for ERP software’s implementation, like balanced scorecard, and interoperability standards, like Extensible business reporting language are recommended to ensure continuous assurance exercised in the most cost effective manner.

The nature of corruption

Wallach (2016) illustrates the exposure of public corruption at all levels in the Rose City, Beaumont school district and Port Arthur city. Public corruption refers to illegal abuse of public power for private benefit (Freckleton , Wright and Craigwell 2012). Essentially, for these cases, it is the small entities’ lax internal control especially for general ledger and business reporting process that exposes the entities to the unlawful manipulation of assets and information. According to the article (Wallach 2016), this financial exposure is closely related to the characteristics of small organizations and local government, which are cash strapped, insufficient resources and outdated technology. Therefore, employees at various levels in charge of public dollar would be able to steal taxpayer resources, like city secretary, public works employees and school administrator, etc. Consequently, besides the loss of taxpayer resources, from a long-term perspective, this would increase taxation on residence and significantly decrease public trust in the local government and entities providing public services.

Continuous Assurance

In order to improve internal control and avoid public corruption associated with accounting fraud, continuous assurance (CA) can be a feasible and effective method for small organizations and local government. CA refers to an automatic methodology for timely analytic monitoring of corporate business processes (CICA/AICPA 1999). It can utilize the information technologies to capture transactional and process data at the source and in the unfiltered form to realize more efficient, effective and timely auditing (Alles et al. 2006). An vital subset of CA is the continuous monitoring of business process which is a function made particularly by the Section 404 of the Sarbanes-Oxley Act 2002 requiring verifying internal controls over the entities’ financial reporting processes (Vasarhelyi et al. 2012). Additionally, it realizes the monitoring elements of internal control stipulated by COSO Framework (Shin and Lee 2013).

Currently, CA is generally implemented in enterprise resource planning (ERP) systems (Vasarhelyi, Alles and William 2010). ERP systems are the off-the-shelf applications that offer a comprehensive set of functionalities supporting and integrating business processes around a single relational database system (Rikhardsson and Kraemmergaard 2006). In the other words, this environment includes highly automated and tightly coupled business processes through software, like SAP, Oracle Business Suite, People Soft, BAAN, ect., which permits ongoing insight into the effectiveness of controls and integrity of transactions running within them(Verver 2008). Moreover, the automation of ERP software can also contribute to increasing the level of security by limiting personnel’s access to data. Consequently, taking advantage of CA implemented in ERP systems and with software, the small entities would not only be able to reduce manual processing and associated manual error, but also efficiently detect and prevent accounting fraud (Vasarhely 2011).

Recommendation  

Continuous assurance is perceived initially as an expensive and risky endeavor for requirement of a consideration investment in implementing, maintaining and training of information technologies (Vasarhelyi et al. 2012). Thereby, for cash strapped small organizations and local government entities, it is necessary to utilize strategic approach of balanced scorecard to evaluating and controlling the implementation of ERP software. Balanced scorecard is the methodology for accessing organization’s activity performances via four components, which are finance, internal business processes, customers, innovation and improvement activities (Brand 1999). The balanced scorecard’s main objective is to transform visions into strategies, objectives and measures. The implementation of ERP software can be interpreted in this way as well. Specifically, visions for ERP software is the motivation, like improving internal control with limited resources, and therefore strategies can be the selection of the relevant ERP modules and measures can be comparison of costs and functions between the different ERP software. As a result, the balanced scorecard effectively serves as a guideline for the controlling of the implementing of ERP software for cost-effective purpose.

Download as (for upgraded members)
txt
pdf
Citation Generator

(2017, 03). The Nature of Corruption. EssaysForStudent.com. Retrieved 03, 2017, from https://www.essaysforstudent.com/Business/The-Nature-of-Corruption/105734.html

"The Nature of Corruption" EssaysForStudent.com. 03 2017. 2017. 03 2017 <https://www.essaysforstudent.com/Business/The-Nature-of-Corruption/105734.html>.

"The Nature of Corruption." EssaysForStudent.com. EssaysForStudent.com, 03 2017. Web. 03 2017. <https://www.essaysforstudent.com/Business/The-Nature-of-Corruption/105734.html>.

"The Nature of Corruption." EssaysForStudent.com. 03, 2017. Accessed 03, 2017. https://www.essaysforstudent.com/Business/The-Nature-of-Corruption/105734.html.