Effective Internal Control System Research Articles

THE PROBLEMS OF INTERNAL CONTROL IN FINTECH-START-UPS

The sphere of the newest financial technologies is a fast-growing and profitable, but high risky direction in the economy of modern Russia. Risks are caused by the possibility of unusual operations (transactions) in the sphere of money-laundering and terrorism financing. Thereupon the effective system of internal control is an obligatory condition of creation and functioning of any organization and especially FinTech start-ups. One of the conditions of the efficiency of the system is timely revealing of the problems in its organization.

The Impact of the Decisions of the COBIT 5 Committee on the Effectiveness of the Internal Control Systems in the Jordanian Industrial Joint Stock Companies

The objective of this study was to identify the impact of IT governance under the COBIT5 framework on the effectiveness of internal control systems in Jordanian industrial companies. In order to achieve the objectives of this study, the descriptive and analytical methodology was used. The study society is composed of the accounting and financial departments, the number of (65) questionnaires were distributed to each company from the study sample of (43) companies, the researchers retrieved (97) questionnaires. After reviewing the retrieved questionnaires it was found that there are (4) questionnaires that are not valid for the statistical analysis. And thus the suitable number of questionnaires for analysis is (93). In order to analyze the study data and test hypotheses, the SPSS program was used in the various statistical analyzes, descriptive statistics and the internal consistency coefficient (Kronbach Alpha). The multiple linear correlation test was also used using the Pearson correlation coefficient and the variance inflation coefficient, Analysis of simple and multiple linear regression. The study reached several results, the most important of which was the existence of a strong and statistically significant relationship between the implementation of COBIT5’s decisions (planning and organization, acquisition and implementation, service provision and support, evaluation and observation). The study concluded with several recommendations, the most important of which was the increase in the degree of companies’ use of the pioneering brainstorming method in the qualification of employees within the companies and evaluating their performance according to the COBIT framework.5 In addition to the need for companies To develop future plans to activate the concept of control and auditing in the environment of the computer and the gradual transition to modern control methods, including automatic control under the COBIT5 framework.

Development of Instruments for Audit Quality Assessment and Control

The role of audit firms as independent institutions certifying the reliability of reporting information disclosed by businesses to the wide range of interested parties is currently increasing. At the same time, the audit market is going through a period of crisis because of the decline in prestige of the profession, low profitability, falling user confidence to the results of audit and the lack of national auditing legislation. On the other hand during crisis times the significance of the control over the quality of auditing including the state control goes up. The article systematizes the results of the research on audit quality assessment and control. It also describes methodological approaches to building an effective internal audit control system, provides practical recommendations on how to improve the reporting data of audit firms, identifies conceptual elements of the quality control system and considers the issues of improving the effectiveness of external control. Implementation of the proposals will improve the competitiveness of audit firms in the crisis industry and allow the transition from formal audit control to substantive control.

The Effectiveness of Internal Control System and Role of Internal Audit on Local Government Performance

This study aims to analyze the effectiveness of control environmental components and monitoring activities as part of the internal control system and examine the effect of partially control environment variables, monitoring activities and the role of internal audit on the performance of local governments in Surakarta. The samples used were 126 employees consisting of a head and a staff in 33 regional organization in Surakarta. The method of analysis using descriptive statistics and linear regression. The results showed that the components of the control environment and monitoring activity on the local government in Surakarta has been done effectively. Research also proves their influence in partial control environment, monitoring activities and the role of internal audit on local government performance.

BACIS THEORETICAL CHARACTERISTICS OF INTERNAL CONTROL

The question of the existence of an effective internal control system is now of particular relevance. The current stage of the economic entities operation in the Russian Federation is a stage of changing the external and internal environment of management, characterized by a high level of uncertainty and instability, which consists in toughening of competitive relations. Domestic organizations have to operate in the conditions of rapid change and development of technologies, a tough competitive environment, growing business diversification, and inconsistency of domestic legislation. One of the main factors for creating the competitiveness of organizations is effective management, based on quality, reliable and complete information about the managed facility. The paper reveals key questions about the internal control of commercial organizations in the non-financial sector. The main interpretations of the term "internal control" and components of the internal control system are considered, the stages of internal control formation are outlined, the place of internal control in a corporate governance system is substantiated, and official powers in the internal control system are identified. Also, the authors present the main documents which should be noted when studying the issue of internal control. The main methods used in this work are the information systematization, processing and generalization.

Effect of Internal Control Systems on Financial Performance of Distribution Companies in Kenya

There is a general consensus that internal Control systems are important management tools in financial management. There has been controversy as to why there is a declining profitability trends among Small and Medium scale Enterprises despite government’s commitment to availability of funds. Economic Survey 2017 statistics indicate a tremendous growth in profitability of small and medium scale Enterprises in Kenya over the last ten years; constituting about 96 per cent of all business enterprises in the country; yet 71% of the business start-ups do not operate beyond their third anniversary. Empirical studies on internal control systems yielded mixed results and focused on different firms rather than SMEs. However, little is known on the effect of internal control systems on the financial performance of distribution companies. The main objective was to analyze the effects of internal control systems on financial performance of small and medium distribution companies. The specific objectives of the study were to: determine the effect of control activities; find out the effect of risk assessment; establish the effect of information and communication on financial performance Moonbluez Enterprises Limited. The study was anchored on Agency and Reliability theory, and a conceptual framework showing the interaction between internal control systems as the independent variable and financial performance as the dependent variable. Correlational and case study design was adopted targeting all the 38 employees while employing census survey technique. Primary data was collected using questionnaires and secondary data was collected from relevant books, journals and periodicals. Reliability and validity of the instrument was checked using test-retest technique and expert reviews and Pilot study was conducted of the 4 employees of Moonbluez enterprises. Descriptive statistics such as mean and standard deviation and inferential statistics such as Pearson’s correlation and multiple regression analysis was employed to analyze the data. Presentation was done by the use of tables and charts. The results of the study may help identify gaps within the systems of internal control at Moonbluez Enterprises Limited and in the distribution industry at large especially among small and medium sized entities. Further the study may also add to the existing knowledge bank regarding book keeping, internal controls and financial performance among small and medium sized enterprises in Kenya. Scholars and researchers who would like to carry out more studies on internal Controls and financial performance in small and medium sized entities may find the study beneficial. Keywords: Financial Performance, Internal control, Risk Assessment, Control activities DOI : 10.7176/RJFA/10-20-02 Publication date :October 31 st 2019

The perceived adequacy and effectiveness of internal control activities in South African small, medium and micro enterprises

Background: South African small, medium and micro enterprises (SMMEs) add significant socio-economic value to the national economy. Unfortunately, up to 80% of these business entities fail after being in existence for only 4 years. Previous research shows that a probable reason for the latter dispensation is that these business entities make use of ineffective and/or inadequate internal control systems which, inter alia , comprises inadequate internal control activities. Objectives: This study seeks to ascertain whether internal control activities implemented in South African SMMEs have an effect on the perceived adequacy and effectiveness of their overall internal control systems. Method: Though exploratory in nature, this study followed an empirical stance through the assistance of survey research. Data were collected from 119 SMME managers and 98 employees of South African SMMEs operating in the fast-moving consumer goods industry. Results: Although only 18 of the 64 tested relationships are found to be statistically significant, none of the formulated hypotheses can be rejected as relevant statistically significant predictions can be made in relation to the perceived adequacy and effectiveness of internal control systems when applicable internal control activities of these business entities are taken into account. Conclusion: This study provides a foundation for future studies to both scrutinise and enhance the internal control environment in South African SMMEs, ultimately improving the sustainability rate of South African SMMEs.

The Role of Internal Control in Raising Employee Productivity in Jordanian Bank

Internal control helps organizations achieve their objectives and maintain and improve their performance, and the performance of their employees. The Committee of Sponsoring Organizations of the Tread Way Commission issued an Internal Control — Integrated Framework, to help organizations in designing, implementing, and conducting internal control and assessing their internal control systems’ effectiveness, this Integrated Framework, included the five factors of control system, which are Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring Activities. The research examines the relationship between internal control system of an organization and employee engagement, and the effect that such has on the performance of the employee in the organization, and job satisfaction. This research primarily aims at finding out the impact of internal control system on employee performance in Jordanian companies, especially those in the Jordanian banking sector. Internal control systems will influence employees’ performance in two ways, through having an effective internal control system, or through not having an effective internal control system. The research therefore tends to evaluate the extent of adherence to internal control System in Jordanian banks, its impact on the performance of employees, and finally the recommendations of the researcher.

СИСТЕМА ВНУТРЕННЕГО КОНТРОЛЯ И АУДИТА В СТРАХОВЫХ ОРГАНИЗАЦИЯХ: ПРОБЛЕМЫ И ПЕРСПЕКТИВЫ РАЗВИТИЯ

В статье исследуются вопросы организации систем внутреннего контроля как формы реализации рисковой функции страхования. Анализируются статистические данные по рынку страховых услуг и обосновываются направления развития системы внутреннего контроля и аудита страховых организаций, её взаимосвязь c государственным финансовым контролем финансовой устойчивости субъектов страхового дела. Рассматривается автоматизированная система внутреннего финансового контроля и аудита, построенная на принципах риск-ориентированного подхода в соответствии со стандартами Solvency II, как механизм, способствующий достижению локального компромисса в отношениях участников страховых экономических отношений. В ходе проведения исследования был сделан вывод о том, что страховым организациям необходимо внедрение эффективной системы внутреннего контроля, которая позволяла бы органам страхового надзора осуществлять превентивное выявление рисков потери финансовой устойчивости и платежеспособности субъектов страхового надзора.Цель – разработка модели системы внутреннего контроля и аудита страховых организаций в системе государственного страхового надзора в соответствии с риск-ориентированным подходом.Метод или методология проведения работы: статья подготовлена на основе проведения кабинетных исследований, информация собрана посредством качественных методов сбора данных, а именно сравнительного анализа, факторного анализа, формализованного контент-анализа.Результаты: разработана модель системы внутреннего контроля и аудита, основанная на принципах риск-ориентированного надзора в целях ранней диагностики рисков страховых организаций.Научная новизна исследования – разработка рекомендаций по совершенствованию принципов и методов внутреннего контроля и аудита страховой организации в системе государственного страхового надзора, построенной на принципах риск-ориентированного в целях превентивной диагностики рисков страховщика.Область применения результатов: полученные результаты целесообразно применять субъектами страхового надзора, в частности страховыми организациями и органами страхового надзора.

CONTROL OF QUALITY AS AN IMPORTANT TOOL FOR DEVELOPMENT OF INTERNAL CONTROL

Development of internal controls is a highly important issue for the organization, especially for public institutions, because internal control system creates mechanism to effectively utilize human, financial and time resources. Public institutions are characterized by various risks, such as: uneconomic and unreasonable spending of budget funds, corruption, fraud and so on. In order to reduce these and other risks, it is important that organizations have an effective system of internal control. The internal control system in the public sector is regulatedby the relevant legislation and standards, which determines that internal control includes: Financial management and control system. Functionally independent internal audit and Harmonization Center. Each of them is an integral part of internal control. Their independence is the prerequisite for the existence of an effective system. The article presents results of our research carried out by the internal audit benefit and quality.

CAN THE INTERNAL CONTROL SYSTEM REDUCE FRAUDULENT USE OF VILLAGE FUNDS IN ADVERSE SELECTION CONDITION?

In recent years, corruption cases at the village level have been in the public spotlight. This was evidenced through around 154 corruption cases at the village level involving 112 village heads, 32 village officials and 3 village heads. This corruption case resulted in the state experiencing a loss of 47.56 billion rupiah during 2015-2017. This case is carried out through various modes such as the practice of budget abuse, fictitious reports, fictitious activities/projects, and budget bubbles. These various modes occur because the internal control system is ineffective, so it provides an opportunity for actors to act opportunistically. The goal is to maximize his personal interests as agents rather than the interests of the community as principals. This opportunistic behavior is caused by the existence of information asymmetry. Information asymmetry creates conditions for obtaining information that is not aligned between the village head as an agent and the community as the principal, so that the emergence of adverse selection. This study aims to examine the effect of the internal control system on fraudulent use of village funds in agency conflict conditions through adverse selection. This study used the laboratory experiment method with the subject being Accounting Student at Pattimura University Ambon. The data analysis technique uses Two-Way ANOVA with a 2x2 factorial experimental design. The results of the study show that (1) adverse selection conditions affect the relationship between the internal control system and fraudulent use of village funds, (2) the internal control system that does not effectively affect fraudulent use of village funds under adverse selection is compared to no adverse selection (3 ) adverse selection conditions do not affect fraudulent use of village funds when the internal control system is effective, and (4) in the absence of adverse selection, an effective internal control system will reduce fraudulent use of village funds compared to ineffective internal control systems.

The system of intrabank control as a way to prevent the emergence of problem loans in banks

The article determines that the legislation of Ukraine lays down the concept of priority of debtor’s rights and such a situation provoke the irresponsibility of borrowers to fulfill their obligations and puts the rights of creditors and depositors in dependence on the borrower’s credibility. The purpose of this article is to evaluate the approaches to managing problem of loans of banks and to develop the system for preventing the occurrence of such indebtedness in banking institutions through the introduction of the internal banking control system. The tasks of the research are: the determination of approaches to the management of problem indebtedness of banks; providing a description of the methods for managing problem loans with their advantages and disadvantages; the formation of elements of intra-bank control as the system aimed at preventing the emergence of doubtful debts in the future. In the course of the research, the authors apply a systematic approach (for the formation of the structure of the internal banking control system); the methods of analysis and comparison (to assess existing approaches and the methods for managing bad debts). The authors highlight two main approaches to the problem of debt management and the advantages and disadvantages of using the methods of restructuring the problem loans of Ukrainian banks in the current economic conditions are highlighted. It is concluded that in order to prevent the emergence of problem loans in the future, it is necessary for commercial banks to introduce the system of early warning of the problem debt occurrence at the stage of assessment of the borrower's creditworthiness and the issuance of a loan that can be realized by creating the effective system of internal banking control. The formation of such a system involves the determination of the following components: the subject of control; the object of control; the goals and objectives of control; control actions that are implemented through the use of control tools. The introduction of the system of internal banking control in banks will result in reducing problem loans and the amount of credit risk, increasing the profitability of credit operations.

The role of international requirements in the internal control system organizing

The article considers the development features of internal control in developed countries. An international experience of internal control system functioning of the world leading countries and opportunity to adapt its most acceptable progressive achievements to the conditions of Ukrainian enterprises activity is investigated. An experience of various international organizations and documents, which they proposed for internal control system organization, are analyzed. It has been substantiated that in recent years these organizations either update already existing documents regarding internal control, or new documents appear, which are extension of previous ones. А comparative characteristic of internal control different concepts is given. It was revealed that in the future all concepts, which proposed by different organizations were improved and today these countries has an effective system of internal control, both in relation to government agencies and private structures. It has been proved that regarding to internal control at Ukrainian enterprises, it is advisable to use the document «Integrated concept of internal control», which in the future will be find wider application in the country. The integrated approach provides for penetration into all business processes with the further information compilation and its timely communication to individuals, who on its basis, must make management decisions, that aimed at maximizing of an enterprise activity efficiency. It is proposed to adapt the most acceptable progressive achievements of foreign experience of internal control systems functioning of the world leading countries to the conditions of Ukrainian enterprises activity

PENGARUH SISTEM PENGENDALIAN INTERN TERHADAP KINERJA APARATUR PEMERINTAHAN NAGARI DALAM PENGELOLAAN KEUANGAN NAGARI


 
 
 The purpose of this study was to analyze the effect of internal control system on the performance of nagari apparatus in nagari financial management in Tanah Datar Regency. This study was a quantitative research with associative method. The population of this study was all nagari apparatus in Tanah Datar Regency, which numbered 600 people.Sample inthis study was consisted of 248 nagari apparatus determined with Slovin formula. Besides, samplein this study determined through multistage random sampling technique. Data in this study were collected through questionnaires with Likert scale measurement distributed to respondents. The data were then analyzed using multiple linear regression. The results of this study indicated that internal control system (in the planning, implementation, administration, reporting, and accountability stages, together and partially), had a significant effect on the performance of nagari apparatus in managing nagari financial in Tanah Datar Regency. So that it could be concluded that the internal control system of nagari apparatus had a significant effect on the performance of nagari apparatus in nagari financial management in Tanah Datar Regency.
 
 

Efektivitas Sistem Pengendalian Internal dalam Pendeteksian dan Pencegahan Fraud di Lingkungan Perguruan Tinggi

The purpose of this study is to reveal potential fraud symptoms occurred in the university environment and the role of internal auditors in detecting and preventing fraud. This research was conducted with a qualitative approach. Source data used are primary data. Determination the source of the data in a qualitative study using purposive sampling. Respondents in this study consisted of a team of Quality Assurance Agency and a Lecturer who once served as an internal auditor in the Quality Assurance Agency.
 The results showed at University many internal auditor conduct examine final report. Regulation of Minister Research, Technology and Universtiy Indonesia and the other regulation expected every University able to detect and reduce and prevent fraud. develop an effective internal Control System so as to prevent fraud. Prevention will be effective if the Rectoras the leader of University have Operational Prosedur Standar is done carefully.

The Effect of Internal Control Systems, Accounting Systems on the Quality of Financial Statements Moderated by Organizational Commitments

The Effect of Internal Control Systems, Accounting Systems on the Quality of Financial Statements Moderated by Organizational Commitments

The Effect of Internal Control Systems on Financial Performance in the Kassena Nankana Municipality, Upper East Region

The study aims at determining the effect of internal control systems on the financial performance of Kassena Nankana East Municipal Assembly, in the Upper East Region of Ghana. The study was cross sectional and adopted a case study approach. The data for the study was completely primary and was gathered through face- to -face interaction with respondents (the staff of the Kassena Nankana East Municipal Assembly). A purposive sampling technique was use to select sixty (60) respondents for the study, finally the data was analysed using central tendency, frequencies and percentages and the information represented with tables, charts and graphs. The findings of the study showed that, there is a strong relationship between internal control system and organizational financial performance of the Kassena Nankana East Municipal Assembly. It was concluded that organizations that had invested on effective internal control systems had more improved financial performance as compared to those organizations that had a weak internal control system. Base on the findings the study recommends that, the governing body, possibly supported by the audit committee, should ensure that the internal control system is periodically monitored and evaluated.

A Study on Effectiveness of Internal Control System in Selected Banks in Saudi Arabia

The study is to attempt to examine effectiveness of internal control system in selected Saudi Banks in Saudi Arabia. The effectiveness of internal control depends and interrelated to five components viz., Control Environment, Risk Assessment, Accounting Information System and Communication System, Control Activities, and Self-Monitoring. These components derived from management and integrated with the management process. Although the components are applicable to all banks, small and medium, sized banks can apply them separately on a large scale. Its control can be less formal and less structured, yet a small bank can control effective internal controls. The study concluded that the Banks in Saudi Arabia have satisfactory internal control system. The Al Rajhi bank has top most internal control system in selected banks. It recommended that there still need to improve in control environment, risk assessment and communication system in banks. The study statistically proved that there is significant difference in effectiveness of Internal Controls in the Selected Saudi Banks.

THE INFLUENCE OF INTERNAL CONTROL SYSTEM EFFECTIVENESS, COMPENSATION COMPLIANCE, AND INFORMATION ASYMMETRY ON THE TENDENCY OF ACCOUNTING FRAUD (A CASE STUDY ON SEHATI CREDIT UNION)

A cooperative is a governmental organization established to enhance economic growth and national unity. As the development of the law on cooperatives, the present and developing institutions similar to Savings and Loan Union is called Credit Union. A cooperative is very vulnerable to the risk of loss. Insecurity is possible because of the tendency of accounting fraud. Some things that can affect the tendency of accounting fraud are internal control, compliance compensation, and information asymmetry. This research aims to determine whether there is any influence of internal control system effectiveness, compensation compliance, and information asymmetry on the tendency of accounting fraud. The research uses the quantitative method, and the research subject is Sehati Credit Union. The research data consist of primary and secondary data, especially the purposive sampling data which are collected from 36 respondents. Whereas, the data analysis technique uses multiple regression analysis using SPSS 21 software for Windows. The research concludes that the effectiveness of internal control system has a partially positive significant influence on the tendency of accounting fraud, compensation compliance has a partially negative significant influence on the tendency of accounting fraud, and information asymmetry has a partially positive significant influence on the tendency of accounting fraud. It means that the effectiveness of the internal control system, compensation compliance, and the information asymmetry have significant influences on the tendency of accounting fraud. Keywords: Internal Control System, Compensation Compliance, Information Asymmetry, Accounting Fraud.

THE INFLUENCE OF INTERNAL CONTROL SYSTEM EFFECTIVENESS, COMPENSATION COMPLIANCE, AND INFORMATION ASYMMETRY ON THE TENDENCY OF ACCOUNTING FRAUD (A CASE STUDY ON SEHATI CREDIT UNION)

A cooperative is a governmental organization established to enhance economic growth and national unity. As the development of the law on cooperatives, the present and developing institutions similar to Savings and Loan Union is called as Credit Union. A cooperative is very vulnerable to the risk of loss. Insecurity is possible because of the tendency of accounting fraud. Some things that can affect the tendency of accounting fraud are internal control, compliance compensation, and information asymmetry. This research aims to determine whether there is any influence of internal control system effectiveness, compensation compliance, and information asymmetry on the tendency of accounting fraud. The research uses quantitative method, and the research subject is Sehati Credit Union. The research data consist of primary and secondary data, especially the purposive sampling data which are collected from 36 respondents. Whereas, the data analysis technique uses multiple regression analysis using SPSS 21 software for Windows. The research concludes that the effectiveness of internal control system has a partially positive significant influence on the tendency of accounting fraud, compensation compliance has a partially negative significant influence on the tendency of accounting fraud, and information asymmetry has a partially positive significant influence on the tendency of accounting fraud. It means that the effectiveness of internal control system, compensation compliance, and the information asymmetry have significant influences on the tendency of accounting fraud.