Internal Control Design Research Articles

Optimizing internal control in public hospital supply chain: a game theory-based approach.

Our study aims to enhance the precision of internal control construction within public hospital supply chains and minimize the subjective bias influence. We have integrated the game theory combination weighting method into the design of internal control paths and based on this, developed a series of pioneering solutions. This innovative approach is anticipated to heighten the effectiveness and scientific rigor of the internal control design scheme within the supply chain. Firstly, we utilized literature review and expert interviews to delve into the key factors of public hospital supply chain internal control, forming an index system for public hospital supply chain internal control that aligns with current informatization requirements. Subsequently, we incorporated the Game Theory Combination Weighting Method into this study. By means of the Analytic Hierarchy Process and the Entropy Weighting Method we determined the subjective and objective weights of each index and obtained their comprehensive weights through the Game Theory Combination Weighting Method. Then, based on the analysis results, we designed a series of internal control construction schemes and implemented these schemes at Weifang Maternal and Child Health Hospital between 2019 and 2023. Finally, using the Fuzzy Comprehensive Evaluation Method to assess and compare the actual effects before and after the implementation of the schemes, thereby validating the effectiveness of the Game Theory Combination Weighting Method in the design of the internal control path of public hospital supply chains. The fuzzy comprehensive evaluation results for the years 2019 and 2023 demonstrated that after implementing our design schemes using the Game Theory Combination Weighting Method, the hospital's satisfaction in aspects such as plan-side control, purchase-side control, asset-side control, expenditure business control, and contract management control has significantly improved. Our research indicates that the Game Theory Combination Weighting Method is applicable to the path design of internal control links in public hospital supply chains. This method has effectively enhanced the targeted improvement of weak links within the construction of internal controls in the supply chain of public hospitals and is of great significance for improving the scientific nature of supply chain internal control management.

Organizational performance improvements through the design of internal controls, accounting records and determination of unit production costs in industrial smes of transformation, service and assembly

Organizations nowadays need to improve their performance, which is why it is necessary to have all the elements that are part of their administration, especially in the financial area. These SMEs (industrial processing, service and assembly) that have been investigated were found to lack financial information in relation to their production costs and support in terms of internal control elements, accounting records, as well as the calculation of return on investment and recovery of the same, which is achieved through the sale price of products and services offered. The small and medium-sized enterprises (SMEs) that were investigated and derived from their problems, the objective of this study is to show the improvements established for each participating entity and the recommendations suggested at the end of the project as a contribution to this research. The methodology suggested in the participating economic entities, following a description of them, in a period of time and by convenience sample and the application of a procedure consisting of a series of several four stages: analysis of financial data, improvement of internal control of operations, accounting records and determination of unit cost and % of profitability. Contributing in this inquiry this series of procedure and carrying it out, gives the certainty of contributing to a better performance of each one of the organizations and allowing with it to generate valuable financial information and profitability with percentage analysis

Molecular Evaluation of the Novel Coronavirus Infection of Cockroaches and Flies Collected from Kamkar-Arabnia Hospital in Qom City, Central Iran: With Innovated Internal Control.

Due to the confirmation of the presence of the novel coronavirus in the feces and municipal sewerage system, and the feeding of domestic insects from fecal matter, as well as the ability of these insects to mechanically transmit microbes from the sewerage system. This study was aimed at molecular evaluation of the novel coronavirus infection isolated on cockroaches and flies collected from Kamkar-Arabnia Hospital in Qom City, Iran. Totally, 18 samples; (12 samples cockroaches and 6 flies) from the external surface of cockroaches and houseflies as well as their digestive system were prepared. After designed and synthetized exogenous heterologous internal control, the RNA was extracted to investigate the contamination of these samples with the novel coronavirus. To detect the virus, the E and RdRp genes were identified. Investigation of coronavirus E gene using the multiplex one-step qPCR technique on the collected samples showed an amplification plot in CT= 35.70 related to the internal surfaces of cockroaches collected from the treatment and sick room of the hospital. Also, the design of internal control to ensure the accuracy of the extraction process was successful. According to the findings of the present study regarding detecting the presence of the coronavirus infection in the digestive system of domestic insects such as American cockroaches and considering their ability to mechanically transmit viruses, it is recommended to control the domestic insects that are in close contact with humans in crowded places such as hospitals and health centers during the Covid-19 pandemic.

Cloud Outsourcing in the Financial Sector: An Assessment of Internal Governance Strategies on a Cloud Transaction Between a Bank and a Leading Cloud Service Provider

Cloud applications are becoming central and critical to the delivery of financial services. Despite their significance, banks face increased exposure to transaction risks related to the use of cloud services and internal and external pressures to improve their risk management practices. In this study, we use a unique data set from a bank’s cloud register to examine the effectiveness of internal governance on an ongoing cloud outsourcing transaction between a bank and cloud service provider. We employ structural equation modeling and a simple linear regression to test for transaction misalignment and causes of governance inefficiencies. We find that a strong degree of misalignment is largely due to poor design of internal controls and a weak control system that does not provide acceptable indications of residual risk likelihood. The findings indicate that cloud risks are driven not only by agency costs, but also by firm-specific risks which contribute to a number of transaction uncertainties and governance misalignment.

ВНУТРЕННИЙ КОНТРОЛЬ И ЕГО ПОТЕНЦИАЛ В ВЫЯВЛЕНИИ РИСКОВ ИСКАЖЕНИЯ БУХГАЛТЕРСКОЙ ОТЧЕТНОСТИ

Building an effective internal control system contributes to obtaining complete and reliable information necessary for business owners and partners to make current, strategic management decisions and ensure business continuity. In order to increase the effectiveness of internal control in the modern economic realities, it is preferable to focus on timely identification and prevention of potential risks of misrepresentation of financial statements and manipulation of their data due to fraudulent actions. The purpose of the study is to substantiate approaches to the development of an effective internal control design as a factor of increasing the level of development of its potential in identifying the risks of manipulation of financial data. In the course of the study, general scientific methods of analysis, synthesis, systematization, data processing, comparison and generalization have been applied. The authors investigate the challenges and threats of misrepresentation of reporting data, signaling the loss of resources as a result of fraudulent actions. The article reveals a conceptual approach to the construction of an effective internal control design aimed at neutralizing the growing risks of fraud and manipulation of financial statements data on assets, capital and other information arising during communication. The results of the research presented in the article are of theoretical and practical significance, and can be of major use for companies when designing an internal control system, as well as in the educational process when teaching accounting and control disciplines.

Development of an open experimentation tool based on JavaScript for the control of a four‐tank plant

AbstractAt present, one of the main problems which can be found within chemical engineering education is the availability of real industrial plants able to provide an experimentation framework. The importance of this kind of plants lies in allowing students to apply the learned theoretical concepts to solve real problems. In this paper, a remote tool for educational purposes is presented. More specifically, the implementation of a four‐tank plant, its internal control design and the implementation of an EasyJava tool for executing JavaScript code in both simulation and real experimental tests have been widely described. As a result, a tool that allows to perform experimental tests over the plant in both real and simulation modes has been obtained. In this tool, the limits of use are imposed by the plant and not by the own tool.

TxCP: A Coprocessor for LTE-A

With the widely use of 4G network, the corresponding bandwidth processing has become a critical issue. The current recognized 4G network is LTE-A. In the baseband processing for LTE-A, the processing of its physical layer algorithm is the biggest bottleneck for current processors. The use of application specific integrated circuit (ASIC) design has become necessary. This article will introduce a communication dedicated coprocessor (TxCP), specifically for LTE-A physical layer uplink shared/control channel (PUSCH/PUCCH) algorithm for bit-level acceleration. Its internal support for PUSCH/PUCCH CRC, Turbo encoding, equation definable convolutional encoding, data channel and control channel rate matching, channel interleaving, scrambling and modulation supporting QPSK, 16QAM and 64QAM. And in order to ensure that the coprocessor has a certain degree of flexibility, its internal controller design will support a variety of modes to ensure that some of the algorithm modules can be run separately. The programming model of the processor is relatively simple, and the user does not need to go through a complicated design.

Efficiency of internal control: evidence from Swiss non-financial companies

Internal control enables companies to ensure a reliable reporting, to comply with relevant laws and standards and to ensure the efficiency and effectiveness of business processes. However, until now few empirical contributions conceptualizing and empirically investigating the efficiency of internal control have been published. This study addresses this research deficit and develops a theory-based and empirically validated efficiency construct of internal control. From a practical and scientific point of view, there is an interest to identify relevant factors that determine efficient internal control. Overall, four factors have been derived and conceptualized based on theoretical foundations and empirical evidence. By means of an extensive empirical survey of Swiss companies and subsequent structural equation modelling, numerous significant correlations between determinants of internal control efficiency and the efficiency construct have been identified. The empirical results fully confirmed the hypotheses of correlation. Thus, the findings contribute to the body of practical knowledge by deriving specific efficiency criteria and recommendations on the design of internal control to the management. In essence, design parameters from the company’s internal environment and a reduced complexity of internal control structures mainly contribute to efficiency. The efficiency of internal control itself is heavily determined by criteria of target achievement, input–output ratio, coordination efficiency as well as its potential for organizational flexibility.

An Empirical Study on the Internal Control Efficiency of Listed Engineering Companies

authors carried out an empirical study on the internal control efficiency of publically listed engineer- ing companies in China. This study presents an exploration of the relationship of independent director ratios, audit committee quality and auditor independence with the internal control efficiency of publically listed engineering companies and forward suggestions and recommendations on raising the internal control efficiency of publically listed engineering companies. requires that the leader of the listed company should provide self-evaluation report of internal control based on the company's internal control design and operating effectiveness and the company should also regularly employ external audit institutions to provide authentication opinions in terms of the internal control self-evaluation report. From then on, the listed companies in the US entered the internal control information mandatory dis- closure phase. In recent years, in order to guarantee the effective operation of the capital market, China also issued a series of policies and regulations related to the internal control information disclosure of listed companies. In 2006, Shanghai Stock Exchange (2006) and Shenzhen Stock Exchange (2006) issued Control Guidelines for the Listed Companies which clearly require that listed companies should prepare internal control self-assessment report based on the released details about internal control. In 2008, the Ministry of Finance (2008) and five other ministries jointly issued The Basic Norms of Internal Control in Companies. specification is based on the US Sarbanes-Oxley Act, requiring that the listed compa- nies should issue internal control self-assessment report to determine whether the internal control is implemented effectively. Ministry of Finance and five other ministries in 2010 issued the three guidelines with relevance to internal control of listed companies, marking the transition of the internal control information disclosure in China from the voluntary disclosure phase to the mandatory disclosure phase.

Декомпозиция дизайна внутреннего контроля холдинга на основе риск-ориентированного подхода

Декомпозиция дизайна внутреннего контроля холдинга на основе риск-ориентированного подхода

Toehold-mediated internal control to probe the near-field interaction between the metallic nanoparticle and the fluorophore.

Metallic nanoparticles (MNPs) are known to alter the emission of vicinal fluorophores through the near-field interaction, leading to either fluorescence quenching or enhancement. Much ambiguity remains in the experimental outcome of such a near-field interaction, particularly for bulk colloidal solution. It is hypothesized that the strong far-field interference from the inner filter effect of the MNPs could mask the true near-field MNP-fluorophore interaction significantly. Thus, in this work, a reliable internal control capable of decoupling the near-field interaction from far-field interference is established by the use of the DNA toehold concept to mediate the in situ assembly and disassembly of the MNP-fluorophore conjugate. A model gold nanoparticle (AuNP)-Cy3 system is used to investigate our proposed toehold-mediated internal control system. The maximum fluorescence enhancement is obtained for large-sized AuNP (58 nm) separated from Cy3 at an intermediate distance of 6.8 nm, while fluorescence quenching is observed for smaller-sized AuNP (11 nm and 23 nm), which is in agreement with the theoretical values reported in the literature. This work shows that the toehold-mediated internal control design can serve as a central system for evaluating the near-field interaction of other MNP-fluorophore combinations and facilitate the rational design of specific MNP-fluorophore systems for various applications.

HbA1c: A Review of Analytical and Clinical Aspects

After the relationship between glycemic control and the HbA1c concentration was demonstrated, many tests have been developed to determine the HbA1c concentration. The test results are standardized to the International Federation of Clinical Chemistry (IFCC) Reference Measurement Procedure (RMP) in harmony with the efforts of the National Glycohemoglobin Standardization Program (NGSP). The longitudinal use of the test requires strict quality management including accreditation of the laboratory, a dedicated internal control design, participation in an external quality assessment (EQA) program (proficiency test), and careful consideration of pre- and post-analytical aspects of the test. Performance goals for optimizing determination of the HbA1c concentration have been described. As an index of long-term glycemic control and a risk predictor, the HbA1c concentration is an indispensable part of routine management of diabetes. Because of the improving quality of the test, the HbA1c concentration is being increasingly applied in the diagnosis of diabetes. There are, however, concerns of this application in point-of-care settings. The HbA1c concentration is also used to achieve stringent control in pregnant diabetic patients. Strict standardization enables the definition of universal reference values and clinical decision limits. This review describes the present status of analytical and clinical aspects of determining the HbA1c concentration and highlights the challenges involved.

Effects of Prior Internal Audit Work on Internal Control Evaluations

We analyze internal auditor objectivity by examining whether consulting work performed by internal auditors influences their subsequent judgments. We conduct an experiment with experienced internal auditors. We present them with an internal control scenario representing an at-margin internal control deficiency (i.e., borderline between a significant deficiency and a material weakness) and ask participants how likely they are to conclude that the deficiency is a material weakness. We manipulate the extent of prior involvement with the internal control (consulted on the design of the control or no prior involvement) and the type of the control deficiency (deficiency in design effectiveness or operating effectiveness). Consistent with our predictions, we find some evidence that internal auditors who had prior involvement in consulting on the design of the control are less likely than others to conclude that the deficiency is a material weakness, but only when the deficiency being evaluated relates to the design effectiveness of the control. The results have important practical and regulatory implications. According to professional standards, consulting on the design of internal controls is not presumed to impair internal auditors’ objectivity, yet we find a systematic influence on subsequent evaluations for purposes of reporting on internal control over financial reporting.

Rogue Trader : using a movie to teach a large auditing class

PurposeThe purpose of this paper is to explore the possibility of using a movie to teach auditing students about internal controls.Design/methodology/approachA ten‐point questionnaire and Chi‐square test are used to explore self‐perceived cognizance of control awareness, design, testing, and application.FindingsA movie dealing with practical internal control issues may be a valuable part of audit instruction techniques.Research limitations/implicationsThe research is exploratory and non‐longitudinal. No effort is made to quantify changes in assessment or post academic work performance.Practical implicationsGiven the increased relevance of a sound system of internal controls, audit and accounting educators have a practical and moral duty to provide sound instruction on internal control design, testing and application. Using a movie to complement traditional lectures may be useful in this regard.Originality/valueNoting the growing relevance of a sound system of internal controls for organizations, the research explores a means of making lectures on internal controls “come alive” by introducing practical considerations into the audit classroom.

Direct and Indirect Effects of Internal Control Weaknesses on Accrual Quality: Evidence from a Unique Canadian Regulatory Setting*

In this study we examine the effectiveness of a unique Canadian disclosure approach regarding the adequacy of a firm’s internal control over financial reporting (ICOFR). According to this approach, the disclosures of internal control design weaknesses are contained in the ‘‘Management Discussion and Analysis’’ (MDA Kinney and Shepardson 2010). Since 2007, even nonaccelerated filers have had to report under SOX 404 Part (a) which requires separate management certification of the results of an assessment of internal control design and implementation effectiveness. Further, it appears that

How costly is the Sarbanes Oxley Act? Evidence on the effects of the Act on corporate profitability

The Sarbanes-Oxley Act (SOX) was intended to protect investors by improving the accuracy and reliability of corporate disclosures. However, critics have argued that the costs of SOX far outweigh its intended benefits. Prior studies based on stock-price reactions to SOX-related events document mixed evidence on the expected impact of SOX. In contrast, we provide evidence on the net realized costs of SOX by examining its impact on operating profitability. We find that average cash flows decline by 1.3% of total assets after SOX. These costs are more significant for smaller firms, for more complex firms, and for firms with lower-growth opportunities. Annually, these costs range from $6 million for smaller firms to $39 million for larger firms. Further, we document that net SOX-related costs are not limited to one-time expenses associated with internal-control design and implementation. In aggregate, for the 1428 firms in our sample, these costs amount to about $19 billion per year. Profitability is lower for up to four years post-SOX. To our knowledge, ours are the first estimates of the realized net costs imposed by SOX.

Do Client-Prepared Internal Control Documentation and Business Process Flowcharts Help or Hinder an Auditor's Ability to Identify Missing Controls?

SUMMARY: The purpose of this study is to examine the extent to which client-prepared internal control documentation and business process flowcharts affect auditors' ability to detect missing internal controls. A total of 395 experienced auditors participated in a two (internal control matrix: blank or client-prepared) by two (business process flowchart: absent or present) between-participants experiment. The research findings indicate that auditors who were supplied with a blank internal control matrix and a business process flowchart identified significantly more missing controls relative to the three other treatment conditions, among which there were no differences in the number of identified missing controls. The results indicate that when auditors are evaluating the effectiveness of a client's internal control system for a significant business process, they should be provided with a flowchart of the business process under examination and complete their internal control design evaluation before reading client-prepared internal control documentation.

How Costly is the Sarbanes Oxley Act? Evidence on the Effects of the Act on Corporate Profitability

The Sarbanes-Oxley Act (SOX) was intended to protect investors by improving the accuracy and reliability of corporate disclosures. However, critics have argued that the costs of SOX far outweigh its intended benefits. Prior studies based on stock-price reactions to SOX-related events document mixed evidence on the expected impact of SOX. In contrast, we provide evidence on the impact of SOX on operating profitability by examining the net realized costs of SOX. We find that average cash flows decline by 1.3 percent of total assets after SOX. These costs are more significant for smaller firms, for more complex firms, and for firms with lower growth opportunities. Annually, these costs range from $6 million for smaller firms to $39 million for larger firms. Further, we document that net SOX-related costs are not limited to one-time expenses associated with internal control design and implementation. In aggregate, for the 1,428 firms in our sample, these costs exceed $19 billion per year or about $75 billion over the four-year post-SOX study period. Profitability is lower for up to four years post-SOX. To our knowledge, ours are the first estimates of the realized net costs imposed by SOX.

The effect of format and experience on internal control evaluation

PurposeThe purpose of this paper is to investigate whether the use of a questionnaire or a narrative documentation format will impact an auditor's performance in identifying internal control design weaknesses.Design/methodology/approachA field experiment approach with a sample of 73 auditors of varying experience.FindingsIt is found that auditors who completed an internal control questionnaire (ICQ) correctly identified more internal control design weaknesses than auditors who prepared a narrative. Internal control evaluation experience moderated this effect. The results imply that the questionnaire documentation format stimulates an auditor's existing internal control knowledge, thereby enhancing performance when identifying internal control design weaknesses.Practical implicationsThese findings suggest that there are important benefits to auditors that may be lost if they choose not to use questionnaires for internal control evaluation. These findings have important implications for practitioners and standard setters, who appear to be gravitating away from the use of standardized ICQs.Originality/valueThe results of this study may assist organizations that are considering what form their internal control documentation should take in response to the Sarbanes‐Oxley Act of 2002.

Section 404 implementation

Section 404 of the Sarbanes‐Oxley Act requires management to include in the annual report a report on the effectiveness of the company's internal control over financial reporting. This assessment must be supported by evidential matter, including documentation, regarding both the design of internal controls and the testing process. Understandably, many executives are seeking the assistance from their internal auditors in satisfying the Section 404 requirements, leaving internal auditors with the important task of ensuring that the corporation's internal control system is properly documented and tested. This paper discusses how nine leading internal auditors of large publicly listed corporations are assisting their respective companies in implementing the Section 404 requirements. Further discusses some of the significant issues that these auditors are addressing and their prediction on the expected future impact of Section 404.