Internal Control System Essay

Institute of Chartered Accountants of England and Wales as cited by Kumar and Sharma (2005) defines internal control system in a broad manner. According to that “internal Control system is the whole system of controls, financial or otherwise, established by the management in order to carry on the business of the enterprise in orderly and efficient manner, ensure adherence to management policies, safe guard assets and secure as far as possible the completeness and accuracy of records”. It comprises of five components as mentioned above, the control environment, the entity’s risk assessment process, the information system, the related business processes relevant to financial reporting and communication, control activities and monitoring of controls.

Though, those companies encountered of the frauds indeed they might have, internal audit and external audit and other relevant controlling systems. Unfortunately, no one had been able to disclose the real situation in those firms until the bankrupt. Accordingly there is a problem with existing controlling systems or the way of using them in the organizations.

Central bank of Nigeria emphasized that the one of the causes for backward development in Nigeria was attributable to faults in the internal control systems of the banks (Olatunji, 2009). It clearly pointed out how fraud has been penetrated in the financial strength of Nigerian Banks. Therefore, internal control is highly significant in fraud detection and preventions in banking sector too.

In Sri Lankan economy there is a well-established banking system and it includes nearly thirty banks, so more than thousands bank branches function all over the country (http://www.apbsrilanka.org/general/05_banks_in_sri_lanka.html). But sometimes, there are some incidences relates to the frauds, mismanagement and corruptions in this banking sector. Some of them can be highlighted as