Question

The COSO internal control framework identifies five components of an entity's internal control. Which, if any, of those five components of Avon's internal control were flawed? Explain. If there were multiple flaws in Avon's internal control, identify which one you believe was most serious and defend your choice.

Answer 1

Answer:

The COSO internal control framework identifies five components of an entity's internal control.

Which, if any, of those five components of Avon's internal control were flawed?

Of those five components of Avon´s internal control the following were flawed:

1) Information and communication

2) Monitoring

3) Control environment

Explanation:

1) Avon’s global internal audit staff thought about offering CPA provisions´s training to the employees, but it never happended due to budgetary limitations, nor it was informed or communicated to them. It was uncovered that the payments were being made to Chinese government officials in 2005,  however working for a U.S. Company, those bribes were not allowed.}

2) Monitoring: In December 2006, Avon’s global internal audit staff followed up doubtful  activity regarding this matter, but there was no monitoring or evaluations that the deficiencies within the internal control were changed to legal practices.

3)  This is a major internal control flaw as Avon discovered that there were illegal bribes being paid to Chinese government officials, thought about informing their employees that is was unacceptable but then chose not to, and finally was surprised when the bribes continued for another year.  This demonstred a lack of commitment to integrity and ethical values.