OBJECTIVE
All company needs to have an appropriate and effective internal control environment to ensure that the company is managed and controlled in a sound and practical manner.
The internal control environment system is recognize as the main cause of the business.The presence of smooth internal control environment is necessary for well achieving the business objectives.According to O’Leary et al (2006) an adequate system of internal control is considered as critical to good corporate governance.
Organization need effective controls in operating performance directions and increase revenues.Internal controls also help firms prevent operating losses resulting from noncompliance with law and regulations.
…show more content…
• Internal controls help to ensure that an institution or business entitiy is in compliance with the laws and regulations affecting the operations of our business.
• Internal controls provide an environment in which managers are able to meet their targets and the efficiency and effectiveness of their operations.
• Internal controls system provides a procedure for management to monitor the achievement of operational goals and objective.
A company's internal control environment consists of all corporate policies and top leadership's directives to which personnel must adapt when performing tasks. An internal control is a set of measures that department heads put into place to prevent operating losses arising from unfavorable actions, such as fines and lawsuits, technological malfunction, error and fraud.
Responsibility Administrative management is the responsibility of management and is responsible for maintaining a high standard of internal control. Management is responsible for performance of duties of staff as part of a control environment. They are also responsible for assuring that the other major areas of internal control principles are
…show more content…
By performing a periodic assessment, management assures that internal control activities have not become outdated or lost due to costs or other factors.
Internal Control Activities and Best Practices
Internal control activities are the policies and procedures as well as the daily activities that occur within an internal control system. A good internal control system should include the control activities listed below.
1. Preventive: Preventive control activities aim to deter the instance of errors or fraud. Preventive activities include thorough documentation and authorization practices. Preventive control activities prevent unwanted "activities" from happening, thus require well thought out processes and risk identification.
2. Detective: Detective control activities identify undesirable "occurrences" after the fact. The most obvious detective control activity is
Internal controls is defined as a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance
According to PCAOB Auditing Standard 5 paragraph 2, “effective internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. If one or more material weaknesses exist, the company 's internal control over financial reporting cannot be considered
Internal locus of control is how you as a person dictates how their work or personal life is going to go. Meaning the results of something is based on ones behaviors and actions. For example, getting the new job promotion and you knowing that you got the job for your hard work and not because you think, it is out of pure luck.
While the external control prescribes the use of new rules, adoption of new legislation or the institution of new regulations to cover up loopholes, the internal control involves personal character that has developed over time. External control is stated to be the code of ethics (Cooper, 2012). For example, in the conduction of the activities of the ABC Foundation, there is a requirement for balance between these internal and external controls. The external control ensures discourages inclinations to self-interest by the members of the organization, while internal control ensures socially constructive, idealistic, and creative impulses. These leads to the timely implementation of their duties to the various countries the ABC Foundation serves all over the world.
Controlling in management is a function of management that is concerned with making sure that all other functions of the management are put in place and operated effectively. Controlling ensures that it has taken into consideration the monitoring of the output of the employees as well as the establishing standards of performance that will guarantee that the performance of the will always meets the set standards (Spellman,
Businesses play a significant role with the economies of all countries, whether developed or developing. It contributes to the welfare of the society through the satisfaction of needs, provides a source of livelihood to millions of people worldwide. Businesses do not operate in vacuums but operate within business environments. The events in the environment of a company have a direct effect on the success or failure of that company. According to Jain, Trehan and Trehan (2009), business environments can be categorized in two: (1) internal business environment; (2) external business environment. Institutions and organizations are usually in a position of controlling their internal business environment. By doing so, they gain the ability of affecting their institutional performance. On the contrary, it is difficult for a business to control the external environment; however, businesses can identify in advance the opportunities and threats presented by the external environment and take decisive actions to ensure its continued success (Jain, Trehan & Trehan, 2009; Goyal & Goyal, 2009).
In this approach, the focus will be on the internal control objectives so that the control design can be well assessed. First, the auditor will define the control measures and objectives and then find out which measures already installed meet the objectives (Tyrer, 1994).
In controlling, organization has lots of risk factors .Manager take some employee who is able to control and handling risk factors.
Effective control process in an organization would help in gathering information about the process and the employees, this can further help the management whilst taking important decisions in terms of establishing standards to meet standards, measuring the actual performance, as well as comparing performance with the standards. It can further help the companies in achieving their optimum goals so that they can take corrective actions as and when required. The process controls in place and guide and provide the company with the required regulations of the company’s activities. Which can lead to the performance of the company, hence it will also help the organization in terms of monitoring and responding.
Controlling is the fourth management function and its purpose is straightforward- to make sure that actual performance meets or surpasses objectives. It is well used for decision making and problem solving. Effective control depends on other management functions and it gives feedback to them. These functions are planning, organizing and leading. Planning sets directions and allocates resources. Organizing puts people and material resources together in working combinations. Leading motivates people to use these resources in the best way. Basically, the function of controlling is to make sure that the right things happen in a right time and in the right way.Control helps that overall directions of individuals and groups are consistent with short-range and long-range organizational plans. Also, it helps to ensure that objectives and accomplishments are coherent with one another throughout an organization. Moreover, it helps maintaining fulfillment with essential organizational rules and policies. Good example where we can see role of control is in helping to protect individual rights to become equivalent with employment opportunities at work. The control process practiced by managers includes four steps: 1) establish objectives and standards 2) measure actual performance 3) compare results with objectives and standards and 4) take actions if necessary1. The controlling process starts with establishing performance objectives and standards which means that the controlling process begins with planning. Performance objectives should be defined and associated with specific measurement standards for determining how well they are accomplished. Standards are the targets of performance. The next step of the control process would be measur...
Administration role has to be learnt for effectiveness which implies: Organization, Controlling, Commanding, Planning and forecasting are all achieved through study.
The Feedback after applied and executed is the most important of the process of control, Outcome controls are judge by the result of the organization’s activity. The behavior control involves manufacturing to know how the members are doing and behave in a daily base. The financial control in the process execute by monitoring costs and expenditure. The financial control can monitor intangiveis like customer satisfaction and employee morale.
C-Control: Controlling all possible aspects of the business to ensure everything is running according to the plan.
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.
Administrative management theory includes numerous paramount ideas; however these ideas can generally be put into the accompanying general classes: