Internal Control - Damage estimation

[olgas]

Hello,

I am relatively new to the accounting world and would like to get some help.
I am currently designing and implementing a new Internal control system as a part of a financial reporting process. The problem I am trying to overcome is related to the estimation of the potential damage (cost) to liabilities and assets that company might have to be prepared to cover.

Any help appreciated.

Olga

 

[Fidget]

For quite a straightforward question, the answer is quite involved. But to begin with, what is the core activity of the organisation?

 

[olgas]

It is pharma company, specialising in the disolussion equipment for pharma testing.

 

[Fidget]

In which case, from an accounting perspective, you cannot make a provision (in other words, put money aside in the accounts) for something that hasn't come about yet.

So I think you might be better looking at this from an insurance angle and what premium would need to be paid to be insured against potential litigation, and of course, taking into consideration any national or local legislation/regulation that you need to incorporate into your internal controls to minimise the risk of litigation happening.