Effective Internal Control System Research Articles

Business and the internal control system of the audited entity

An important section in any well-functioning company is the internal control system. As one of the functions of management activities, which determines the quantitative and qualitative assessment of the company's performance, control helps to identify vulnerabilities in the company in a timely manner. The fundamental purpose of this work is to study the internal control system and to disclose the concept of the audited entity's business from the theoretical and practical side. In the course of the study, the authors concluded that in order to build an effective internal control system, it is necessary to develop subsections in business processes that lead to control at each process chain.

The role of internal audit in the functioning of an effective system of internal control of enterprises

The author carried out research of the list of issues related to the field of internal audit, namely its role in achieving the effectiveness of the internal control system. The article logically emphasizes the significance of the research area, discloses the objectives and procedure for conducting internal audit. The paper reveals the issues of the organization and functioning of internal audit as a tool for solving the problems of the company in order to increase the efficiency of its activities and investment attractiveness. From a scientific point of view, the study becomes relevant due to the problems presented and the proposed solutions. Among the identified problems there are such as inefficiency of internal audit, errors of subordination, etc.

СИСТЕМА ВНУТРЕННЕГО КОНТРОЛЯ ВЕДЕНИЯ БУХГАЛТЕРСКОГО УЧЕТА И СОСТАВЛЕНИЯ БУХГАЛТЕРСКОЙ (ФИНАНСОВОЙ) ОТЧЕТНОСТИ НА ПРЕДПРИЯТИЯХ РОССИЙСКОЙ АТОМНОЙ ОТРАСЛИ

The article is devoted to the problem of building an effective system of internal control of accounting and preparation of financial statements at the enterprises of the Russian nuclear industry. In the context of a serious rise in the nuclear industry, increasing international competition in this area, the most important issue in the development of Russian enterprises is participation in the construction and maintenance of facilities on the territory of foreign customers. The solution to this issue is impossible without effective cost management of the production process, one of the key aspects of which is the construction of an internal control system. Internal control is essential for improving the efficiency of the company and minimizing financial risks. The entry into force of the Federal Law of 06.12.2011 No. 402 On Accounting determined the need for the mandatory conduct of internal control activities for all subjects of the economy. Therefore, issues related to the internal control system, its conceptual foundations, have become especially relevant now.

Pengaruh sistem pengendalian internal dan budaya organisasi terhadap kualitas pelayanan publik berkelanjutan

Founder and central leaders of policymakers and development in the health sector said several obstacles must be addressed in the health service system, one of which is the low level of hospital services in Indonesia. The health service system in Indonesia still needs to be improved by the government, both in terms of equity, regulation, and system integration. To achieve the goals of sustainable health services, it is necessary to implement an integrated system (internal control system) in the hospital. An effective internal control system can anticipate various environmental changes that occur quickly, increase operational effectiveness and efficiency, and anticipate law violations. To improve the quality of sustainable health services, apart from implementing an internal control system, hospitals also need to carry out various innovations to provide changes in the bureaucratic climate. Innovations are carried out based on learning on all processes that have been carried out by the hospital. Therefore, the objective to be achieved in this study is to determine the effect of internal control systems and organizational culture (innovation and learning culture) on the quality of sustainable public services at BLUD RSUD dr. Slamet, Garut Regency. The data was collected using a survey method using a questionnaire. Data were analyzed using multiple regression methods. The results showed no influence on the internal control system on the quality of sustainable public services, but there was an influence of organizational culture on the quality of sustainable public services.

A fuzzy logic risk control and self-assessment metrics for e-banking operational risk analysis

Operational risk is the risk of losses arising from the failure or inadequate internal processes, human resources, systems, and external events that affect the bank's operations as defined by Basel Committee on Banking Supervision. Defining a suitable set of risk measurement metrics is considered one of the most important issues for any risk analysis. It enables the quantitative evaluation of the risk exposure level and the effectiveness of internal control system. Risk measurement is needed to provide an effective means to quantify the risk of existing or planned systems to enable understanding of the overall security level and to guide decision making. Given the number of successful attacks against financial Institutions and the sophistication of the tactics used by attackers, existing classical measurement approaches are no longer enough. This study focuses on fuzzy logic-based metric identification to measurement of the risk exposure level, to enable financial institutions to see the overall risk level and security state of their E-banking systems and to assist with decision making. This will provide a newer dimension to risk management by shifting from risk measurement based on probability and classical set theory to Fuzzy Logic (FL) measurement. In this paper fuzzy logic-based metrics is presented and expressed as a function of six factors (triggering events, avoidance, recovery, Undesirable Operational State (UOS), cost of Undesirable Operational State (UOS) occurrence and severity of risk occurrence) as proposed by [1].

THE EFFECT OF INTERNAL CONTROL ON ORGANIZATION PERFORMANCE IN REFERENCE TO MOHA SOFT DRINKS COMPANY: A CASE STUDY IN HWASSA PEPSI COLA FACTORY

Internal controls promote efficiency, reduce risks of assets loss and help to ensure the reliability of financial statements and compliance with laws and regulations (Coco, 2005).Thus successful organizations set performance measures that focus attention that identifies and communicates the success, support organization learning and provide a basis for assessment and reward (Brown, 2001).In order to be able to perform, organizations should critically look at customers and all stakeholders in business and know how best they are satisfying their needs. Kloot (1999), adds that organizations should continuously improve their services through assets accumulation, create value, improve quality services and flexibility, internal control system is intervened with organizations operating activities and it is most effective when controls are built into the organizations infrastructure becoming part of the very essence the organizations success in terms of continued improvement on performance standards as part of the competitive advantage of the organization.However according to how work is carried out some companies, there have poor documentations, no segregation of duties which affect organizational performance. This study will investigate the purpose of ascertaining the effect of internal control system on organizational performance.This study used descriptive design in soliciting information on the effect of internal control system on organizational performance. Data was collected from the respondents using questionnaires, and analyzed using descriptive statistics. The study findings indicated that the organization carried out proper authorization and approval of transactions. Sometimes transactions were carried out without proper authorization and sometimes there were no approval, this created room for conducting fraudulent activities like misappropriations.The result of the study also shows that that almost 2/3 of the respondents did agree with the fact that the organization reconciled physical cash with cash book balances, while 21% disagreed on the facts. This was because most business purchases (receipts) were not recorded so identifying the actual value of the assets was difficult leaving accountants with no knowledge on the assets.Based on this results, the study recommends that management should develop more effective strategies that will ensure that internal control is effective and efficient, so that fraud perpetration in the organization will be significantly reduced. The study also recommends that the company should work to correct its internal control system by periodic reconciliation of accounts.

Operational Disruptions, Firm Risk, and Control Systems

Problem definition: Operational disruptions can impact a firm’s risk, which manifests in a host of operational issues, including a higher holding cost for inventory, a higher financing cost for capacity expansion, and a higher perception of the firm’s risk among its supply chain partners. Academic/practical relevance: Although disruptions have been studied extensively in the operations management literature, the emphasis has been on mitigating the deleterious impact on the firm’s production potential rather than its risk. We examine whether implementing and credibly attesting to having effective internal control systems will meaningfully influence the impact of operational disruptions on the firm’s risk and market valuation. Methodology: We exploit a 2004 regulatory change that required certain firms to attest to having control systems in place. Our triple-difference regression specification takes advantage of a regulatory anomaly that excluded a well-defined set of firms from complying with the control system requirement. Results: We find that firms that were obligated to comply with this regulatory requirement experienced a materially smaller increase in their risk and a smaller decrease in their market value in the aftermath of an operational disruption. Firms that were not obligated to comply with this requirement did not experience such benefits in the aftermath of a disruption and instead, experienced a larger increase in their risk. Managerial implications: Fostering a better understanding of whether credible control systems can reduce the impact of disruptions on the firm’s risk and value is important as it identifies a broader set of mitigation strategies available to operations managers. This can help managers achieve a better fit between their risk mitigation initiatives and their objectives and budget constraints.

The Impact of the Standards Implementation of Internal Audit Attributes on the Internal Control System Effectiveness: A Field Study of Banks in Yemen

This study aimed to investigate the impact of the implementation of internal audit characteristics on the effectiveness of the internal control system in banks in Yemen. To achieve the objective of this study, a questionnaire was designed as a tool for collecting the data from the study community which consisted of (18) banks in Yemen, (14) of which, in Sana'a city, were taken as a sample. The sample consisted of 190 employees selected from the internal auditors, internal audit committees and finance managers. The SPSS was used to analyze 155 questionnaires that were valid for analysis. The results of the study revealed that there is a statistically significant positive impact on the implementation of all standards of internal audit characteristics on the effectiveness of the internal control system. In the light of the findings, the study recommends that the Yemeni banks should adopt procedures to enhance the effectiveness of the internal control system, including providing sufficient authority for the internal audit activity The team of internal audit should have absolute independence and continuous training in line with international standards and developments; in addition, conducting a periodic and continuous evaluation of the internal audit activity is recommended to enhance the effectiveness of the internal control system.

The Impact of the Standards Implementation of Internal Audit Attributes on the Internal Control System Effectiveness: A Field Study of Banks in Yemen

This study aimed to investigate the impact of the implementation of internal audit characteristics on the effectiveness of the internal control system in banks in Yemen. To achieve the objective of this study, a questionnaire was designed as a tool for collecting the data from the study community which consisted of (18) banks in Yemen, (14) of which, in Sana'a city, were taken as a sample. The sample consisted of 190 employees selected from the internal auditors, internal audit committees and finance managers. The SPSS was used to analyze 155 questionnaires that were valid for analysis. The results of the study revealed that there is a statistically significant positive impact on the implementation of all standards of internal audit characteristics on the effectiveness of the internal control system. In the light of the findings, the study recommends that the Yemeni banks should adopt procedures to enhance the effectiveness of the internal control system, including providing sufficient authority for the internal audit activity The team of internal audit should have absolute independence and continuous training in line with international standards and developments; in addition, conducting a periodic and continuous evaluation of the internal audit activity is recommended to enhance the effectiveness of the internal control system.

MANAGEMENT FEATURES OF THE STATE FUND FOR REGIONAL DEVELOPMENT OF UKRAINE UNDER THE CONDITIONS OF CURRENT CHALLENGES

Abstract. The article summarizes the arguments and counterarguments within the scientific discussion on the resource management of the State Fund for Regional Development of Ukraine (Fund). The main purpose of the study is to assess the effectiveness of resource management of this Fund from the standpoint of improving the effectiveness of state financial support for regional development in Ukraine. Systematization of literature sources and approaches to solving the problem of effective use of state budget funds to finance regional development goals showed that in general there is a positive assessment of the feasibility of the State Fund for Regional development in Ukraine, but there are significant shortcomings and problems in financing regional development measures. The urgency of solving this scientific problem is that being a significant budgetary resource for the implementation of goals and objectives of regional development, the Fund is not used effectively due to improper management. The study of the peculiarities of the resource management of the State Fund for Regional Development of Ukraine in modern challenges was conducted from the standpoint of assessing compliance with national legislation of budgetary discipline, economic and social feasibility and taking into account the following factors: ensuring full compliance with budget legislation of Ukraine; absence of violations of terms of distribution of means of fund; absence of violations in planning, selection and approval of investment programs and regional development projects; directing the established share of Funds resources to the economic development of the regions; timely and full development of resources at the planned facilities; an effective system of internal control over the effective use of budget funds; based on the results of the study, conclusions were prepared. The methodological tools of the study were the methods of economic and statistical analysis, grouping, comparisons, index analysis and factor analysis. The research period is 2016—2020. The article presents the results of the empirical analysis, which showed that there are systemic problems in the organization of resource management of the State Fund for Regional Development. The study empirically confirms and theoretically proves that it is necessary to update the provisions of Article 241 of the Budget Code of Ukraine to determine the resources of this Fund in the amount of at least one percent of the total fund of the State Budget of Ukraine; the distribution of the fund’s funds should take into account territorial differentiation according to the regional human development index; identification of additional criteria for selection of regional development projects that will ensure the achievement of positive economic changes in the regions; organize an effective system of internal control and internal audit. The results of the study can be useful for use in research and in the activities of state, regional and local governments in terms of taking into account the peculiarities of the management of the State Fund for Regional Development in Ukraine. Keywords: state budget, state fund for regional development, management efficiency, investment programs and projects, regional development, financial support. Formulas: 0; fig.: 1; tabl.: 2; bibl.: 22.

Employee Quality, Internal Information and Corporate Investment Efficiency: Firm Level Evidence

This study investigates the association between the quality of the entire workforces and corporate investment efficiency. We find that the superior internal information generated and collected by high quality employees can enhance managerial investment efficiency. This association is more pronounced in highly complicated firms, firms with more managerial shareholding or firms with higher board independence. The instrumental variable estimations help us establish a causal link between employee quality and investment efficiency. Finally, the validation tests show that firms operated by high-quality employees perform a more effective internal control system, and disclose high quality accounting reports, suggesting that the quality of internal information is indeed higher in these firms.

Beyond the three lines of defense: The five lines of defense model for financial institutions

he purpose of this study is to provide an updated version of the widely accepted three lines of defense model (3LoD) to better apply for regulated financial institutions. The author proposes the five lines of defense model (5LoD) which consists of the existing three lines along with external audit and regulators (comprising the fourth and fifth line of defense respectively). In spite of the fact that the bodies forming the two additional lines of defense constitute the external lines of defense, there should be active in supervising and monitoring control issues within the organization, in strong cooperation with the internal lines. This calls for closer interaction among the internal auditors, external auditors and regulators in the design and implementation of an efficient and effective internal control system, aiming to strengthen the existing framework regarding the governance of modern financial institutions, which operate in a highly demanding regulated environment.

ЭФФЕКТИВНЫЙ ВНУТРЕННИЙ КОНТРОЛЬ КАК ВАЖНАЯ СОСТАВЛЯЮЩАЯ ФУНКЦИОНИРОВАНИЯ БИЗНЕСА

In order to reduce the possibility of misinterpretation of economic activity results and financial reporting indicators as well as to prevent the usage of fraudulent schemes, organizations should create the internal control system, which provides qualitative information support for both managers of various levels and external users. This study is aimed at the requirement definitions imposed by the direct and indirect business actors on the system of internal control providing their effective and efficient cooperation. The following general scientific methods of theoretical knowledge as description, analysis and synthesis, data synthesis and formalization, abstraction and specification have been implemented while conducting the research. The recent analysis showed that most business participants are interested in both their own effective internal control system and effective internal control of their counterparts. Nevertheless, each of them defines their specific requirements to the system of internal control ensuring reasonable confidence in work stability, the reliability of an economic entity as a legal party of a transaction, the prevention of a deliberate violation of laws and regulations established by internal administrative documents and the establishment of the environment that prevents theft and fraud activities, facilitates ethical behavior of all staff members, etc. In whole, the internal control system should provide the legality of activities, the maintenance of assets security and the reliability of financial information improving the efficiency and effectiveness of innovative operations. Therefore, the internal control service would ensure linkage between a legal entity and all its stakeholders. It is the approach that guarantees the efficient functioning of business in the modern economic environment.

Gestión administrativa de las instituciones de educación superior: Universidad Católica de Cuenca-Ecuador

Higher education institutions regardless of their geographical-social context must maintain continuous improvement processes in the various value-generating activities related to teaching, links with the community and research, as well as enabling activities, which is why it is necessary to have with a solid and effective internal control system in order to obtain efficiency, effectiveness and population satisfaction. Therefore, the objective is to analyze the administrative management of higher education institutions, in the case of the Academic Unit of Administration at the Catholic University of Cuenca-Ecuador through the evaluation of internal control applying the model proposed by the Committee of Sponsoring Organizations of the Treadway Commission, to contribute to its improvement. The methodology is descriptive framed in a qualitative, cross-sectional and deductive approach, supported by the literature review. The results reveal a confidence level of 68% and a risk level of 32%. Concluding that the weaknesses established in administrative management respond to the lack of risk plans, contingency procedures,

Effect of Internal Control on Performance of Cooperatives in Nigeria: A Case Study of CSM Cooperative Society Abuja, Nigeria

This paper examined the impact of internal control on operational performance in CSM Cooperative Society. Cooperatives have become a good source of affordable finance for both low and medium income group all over the world. As critically important as cooperatives are to the growth and development of Nigeria vide the provision of funds for business and investment hence employment, they may not survive in the long term if they are not properly managed. The presence of an effective and efficient internal control system will go a long way in aiding the cooperatives to manage their operations well. The study investigated internal control impact on performance of cooperatives in Abuja. The target population was the Executive Management Committee, Senior Management, Senior and Junior staff of CSM Cooperative, Abuja, Nigeria. Survey method was employed, and questionnaires were distributed to all the categories of employees identified. Multiple-Linear Regression was used to analyze the data collected vide a 5 point Likert-scale questionnaire. The study revealed that the relationship between internal control (monitoring, control environment, control activities) and performance of cooperatives is not significant. It was recommended that cooperatives should ensure that they seek for and implement measures that increase profitability in addition to instituting a good and functioning system of internal control. The study also recommended that future research should add the two variables of internal control not covered in this research and also use a sample number of cooperatives in Abuja.

Enterprise Risk Management And Internal Audit Model Proposal for Turkish Agricultural Credit Cooperatives

Örgütlerdeki önemi ve fonksiyonu bakımından denetim tartışılmaz bir faaliyettir. Denetimin rolünü gerçekleştirebilmesi için de yerinde yapılandırılmalıdır. Kamu İç Kontrol Standartları doğrultusunda kamu kurumları, riskleri tanımlamak, değerlendirmek ile izlemeye yönelik sistem kurmaları gerekmektedir. Risk belirleme faaliyetleri, kamu kurum stratejilerinin kararlaştırıldığı planlama prosedürlerine entegre şekilde yürütülmelidir. Risk yönetimi örgüt hedeflerinin tutturulmasında ehemmiyet teşkil etmesi ile iç denetim birimlerinin de bu hususta danışmanlık hizmeti vermesi düşünülmektedir. Türkiye Tarım Kredi Kooperatiflerinde denetim faaliyetleri merkez birliğine bağlı müfettişler ile bölge birliklerine bağlı kontrolörler marifetiyle yürütülmektedir. Teftiş, inceleme ve soruşturma konularında bu birimler arasında görev çakışması bulunmaktadır. Bu kapsamda çalışmanın amacı, Türkiye Tarım Kredi Kooperatiflerinde etkin iç kontrol ile iç denetim sisteminin nasıl uygulanabileceğini ortaya koymaktır. Çalışmada ilk olarak, Kurumsal Risk Yönetimi ile iç denetim kavramları açıklanmıştır. Uygulama kısmında ise, gerekli şartları sağlayan risk temelli bir iç denetim süreci için model önerisi sunulmuştur. Araştırma neticesinde Türkiye Tarım Kredi Kooperatiflerinde de Kurumsal Risk Yönetimi ve iç denetim konularında çalışmalar yapılması gerektiği tespit edilmiştir.

Control and analytical aspects of the management of financial results of enterprises

The presence or absence of effective internal control system at the enterprise has a significant impact on the success of business development, competitiveness increase, development of information system, improvement of quality of accounting and analytical support of enterprise management system. With the help of internal control system the directions of improvement of financial and economic activity of the enterprise are defined, the procedures allowing to maximize profit are defined, rational distribution of expenses is provided. The purpose of research - development of theoretical bases and development of recommendations about perfection of methodical maintenance of the internal control of financial results. For development of theoretical bases of internal control the article suggests conceptual model of internal control system of financial results. During the research the procedures which are carried out at internal control of financial results are ranked depending on the control stages. Working documents which promote increase of efficiency of planning of inspection, timely collection of proof and full realization of control measures are offered. The application of the developed working documents in practical activities, will contribute to achieving the goals and solving urgent problems of internal control for effective management of the financial results of the production activities of the enterprise.

Accounting and control procedures in risk assessment of information environment distortion

Accounting and control is the foundation of prosperous business. It is impossible to create an effective internal control system without taking into account the organizational and methodological aspects of the accounting process. Therefore, there appears a need for an integrated assessment of accounting and control procedures as a single unified system. The application and introduction of state-of-the art digital technologies is of great importance during the development of high-technology business. In this regard, there is a need to find a system or technology that could make it possible to generalize accounting and control procedures to reduce the risk of the information environment distortion. One of such technologies that implements the formation of a continuous sequential chain of blocks is the blockchain technology. The present article specifies the structure and content of accounting and control procedures blocks using the blockchain technology. The selected blocks include accounting and control procedures based on the sequence of the accounting process. As a rule, control procedures applied by an economic entity do not cover all the risks of accounting information distortion. For that reason, one needs to assess them in order to determine the risks and minimize them. To assess the risks of the information environment distortion, a methodology based on the evaluation of their coverage completeness by accounting and control procedures has been developed. Through a well-rounded assessment of the information environment distortion risk, the proposed methodology will allow one to form accounting information systematically as well as in a quality manner and manage control procedures in order to make effective management decisions.

Ketepatan Waktu Pelaporan Keuangan: Sistem Pengendalian Internal dan Sistem Informasi Pengelolaan Keuangan Daerah

Financial reports must provide information that is useful for making a decision, where relevant and reliable information is influenced by the timeliness of reporting. This study aims to determine the effect of internal control systems and information systems on regional financial management on the timeliness of partial and simultaneous financial reporting of case studies at the Bengkalis Department of Transportation. This research is descriptive quantitative in nature, while the data sources used in this study are primary data and secondary data. Data collection techniques in this study were interviews, documentation, questionnaires and literature study. The data analysis technique used was data quality test, data normality test, multiple linear regression test, hypothesis test and determination coefficient test. The results of this study are partially and simultaneously there is a significant influence between the internal control system and the regional financial management information system on the timeliness of financial reporting at the Bengkalis Department of Transportation.

Improving the quality of management based on internal control system

The management system effects on its object through general functions. Relationship and interaction of these functions create a close control cycle. The control is the leading management function. This paper discusses the goals of building an effective internal control system that generates reliable information for making management decisions. The authors structure the internal control system and research sources of information base for its functioning. Moreover they select methods of quality assessment of the internal control system and formulate the stages of evaluation of its effectiveness in an enterprise.