It must include information on the principal risks and uncertainties that may affect a company’s long-term value. 2.3 Objectives of internal control system As indicated in the above definitions, internal control helps to achieve the organization's objectives and mission and there are four purposes of internal control: 1. To produce quality products and services, to promote efficient and effective operations and consistent with the organization's mission; 2. To protect resources against loss due to errors and fraud waste, abuse and mismanagement; 3. To guarantee adherence to laws, regulations, contracts and management directives; and 4.
The organization generates and then utilizes the relevant, superior information in order to support the working of the internal control. 11. The organization interconnects information within it, comprising the objectives and the tasks for the internal control which are essential to sustain the working of the internal control. 12. The organization communicates with the outside parties concerning the matters which affect the roles of the internal controls.
Describe the key risks facing the business activities within the scope of the audit. 4. Identify management practices in the five components of control used to ensure each key risk is properly controlled and monitored. Internal Audit Checklistcan be a helpful tool to identify common risks and desired controls in the specific process or industry being audited. 5.
The challenges may emanate from poor judgement in decision-making, human error, management‘s ability to override controls, collusion to circumvent control, and consideration of costs and benefits relative to internal control. No system of controls can be an absolute guarantee against the risk of wrongdoing or honest error. Any system that attempted to reach that goal, especially in a complex organization, would impose costs far out of proportion to the risks and create rigidities for the organization. Thus the proper goal of the control system should be to provide reasonable assurance that improprieties will not occur or that if they occur, they will be revealed and will be reported to the appropriate authorities (Pridgen et al.
1. Internal control of a corporation must be improved to avoid the similar crisis to occur in the future. Failure to strengthen the internal control system will lead to collapse of the corporation. This is because a weak internal control will accumulate problem from the business operation and thus increase operation risk as a whole. This is a very common problem in the banking industry.
Internal market factors refer to variables within the organization that affect the internal business environment and ultimately affect the functioning and success of the organization. The essential key success for companies is to control the internal and external factors of the market. The company has the potential to control internal factors that arise within the company. Commonly, company management, employee strength and financial stability are part of internal factors. The company 's organization, leadership, structure, Internet connection and system error are very important for a stable business environment.
A company can have sound corporate governance and a good standard of code of ethics but lack people with strong moral principles and high quality of being honest e.g. senior managers and directors. The board of directors must have a crystal, clear ethical leadership before on their power of firing unethical directors and mangers. The specific ethical values that justify all features of corporate governance are responsibility, accountability, fairness and transparency. Therefore the board is required to act ethical towards shareholders and stakeholders for the sake of the
Report) in United Kingdom, were established to investigate the reason behind the large number of business failure, frauds, and audit failures. This effort has been followed by the introduction of the definition of internal control by the committee of sponsoring organizations of the Treadway Commission (COSO) in 1992, 2013 as “a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance”. The Canadian Institute of Chartered Accountants (CICA) introduced its definition to internal control as “procedures, processes, and methods implemented by management to ensure the company 's efficiency
It requires roles and responsibilities , organizational structure, performance measurement, defined tasks and oversight mechanisms. Implementing a risk evaluating for all information in a company is costly, time-consuming and can make pressure to the available resources . It’s is difficult to the organization to identify the right level of details which are in risk and access risk based on the business . Few basic outcomes of information security should be included in IT governance
Internal control plays an important role in accounting. According to the Committee of Sponsoring Organizations (COSO) Internal Control-Integrated Framework, internal control is define as a process affected by an entity’s board of directors, management and other personnel which designed to provide reasonable assurance regarding the achievement of objectives in effectiveness and efficiency of operations, reliability of financing reporting and compliance with applicable laws and regulations. Through internal controls’ policies and procedures, management can acquire reasonable assurance that the company follows the procedures in accordance with achieving its objectives and goals. A poor internal control procedures might result in a company’s failure.