Internal Control Framework Research Articles

An AHP based optimized tuning of Modified Active Disturbance Rejection Control: An application to power system load frequency control problem

This paper presents Modified Active Disturbance Rejection Control (MADRC) scheme and a systematic procedure to tune its tuning variables via. observer and controller gains. The problem of tuning is formulated as a constrained multi-objective optimization problem. Depending upon the application appropriate objective functions are chosen, and a unified objective is developed based on weighted sum approach. Five different weight combinations are considered, which result in five objective functions. Each objective function is individually optimized using Teaching-Learning Based Optimization (TLBO), this leads to five sets of tuning variables. Best among five alternatives will be selected based on Analytical Hierarchy Process (AHP). The effectiveness of this approach is validated through its application to a power system with load frequency control problems. Different simulation examples involving single-area and multi-area power systems are considered in the presence of sudden load disturbances, model uncertainties, and parameter variations. Further stability analyses are carried out in a standard two-degree of freedom Internal Model Control (IMC) framework.

THE INTERNAL CONTROL OF MANAGEMENT ACCOUNTING INFORMATION SYSTEMS OF THE STATE-OWNED ENTERPRISES IN INDONESIA

This article aims to examine the implementation of internal controls in management accounting information systems. Management accounting information system is used as a tool to generate relevant information in decision making. In order to make Management accounting information system progressed as expectations, the internal control is needed as a functioning controller of Management accounting information system in the organization. COSO Internal Control framework focuses on the effectiveness of information systems controls that will improve the quality of management accounting information system. This research uses descriptive analytic method, data collected by using questionnaire distributed to operations manager in 56 State Owned Enterprises. The findings shows that generally the internal control in the Management accounting information system in State Owned Enterprises (SOEs) has been in a good categorized, but there is still found some internal control weaknesses in SOEs, which is SOEs is less effective in assets controlling and data security controlling. Less good attention or less optimal of each SOEs in controlling its assets is known from the answers to the operational managers who said that is less good respondents’ attention in conducting assets inventory that is registered in the system physically.

LEGAL REGULATION OF RELATIONS IN THE FIELD OF IMPLEMENTATION OF FINANCIAL CONTROL, ACTIVITIES OF HIGHER EDUCATIONAL INSTITUTIONS

The article generalizes the existing approaches to the definition of the term “financial control”. A detailed analysis of the Law of Ukraine “On Education”, the Regulation “On State Audit Office” and the Concept of Development of State Internal Financial Control are carried out. The state and prospects of internal and external financial control in higher educational institutions are investigated. It is substantiated that the legal department, in the state of which the specialist with special knowledge in the field of budget institution activity is desirable, is responsible for the legality and legal validity of the decisions taken. The specified person has the authority and responsibility for receiving and using funds from the budgets with the maximum achievement. In the framework of internal financial control, it is expedient to build an information and communication system for monitoring and processing of common methodological and organizational control principles through the development of the Regulations on the implementation of internal control, job descriptions of employees and the Guidelines for the implementation of internal control.It is noted that financial control, as a separate field of research has always been in demand and caused considerable interest. Given the cross-cutting nature of financial control, it is logical that it is unique and unique in various areas of implementation. Uniform unified financial control knowledge can not be applied — each industry has its own nuances. It is determined that financial control occupies the leading place in the activity of the University and, subject to its high quality, results will surpass all expectations. The existence of a legislative framework regulating the procedure for the implementation of financial control, the rights and powers of controlling bodies is not a guarantee of success. First of all, it is necessary that the specified laws be fulfilled and the controlling entities deliberately comply with the requirements of the legislation not because of the fear of negative consequences, but because of the desire for effective, economical use of funds in order to achieve the best result.

Robustness diagrams based optimal design of run-to-run control subject to deterministic and stochastic disturbances

In this article, we present a robust optimal design methodology for run-to-run control to cope with batch processes subject to deterministic shifts of various magnitudes and stochastic disturbances with first-order autoregressive moving average dynamics. A tradeoff performance index is developed in closed form to assess both transient and asymptotic properties of output quality in the presence of fixed metrology delays. The performance index can be easily minimized to find the unconstrained optimal design of a run-to-run controller implemented by a second-order filter in the internal model control framework. Not only do such design results clearly reveal when and why the conventional exponentially weighted moving average controller is not the best choice, but they also indicate that the second-order filter would constitute the best controller structure and achieve superior performance. If the unconstrained design does not satisfy the inequality constraints on robust stability, a constrained optimal design is sought and several robustness diagrams are established to enclose optimal solutions of filter parameters subject to specified gain margins. With the aid of these diagrams, a convenient design procedure for metrology delays of zero and one is furnished to resolve difficulties in constrained optimization and identify rapidly the globally optimal design of the second-order filter. The design methodology is justified by simulated examples faced with a wide variety of deterministic and stochastic disturbances, assigned model mismatch, and different metrology delays.

Relationship between internal audit factors and corporate governance

In the aftermath of major corporate financial scandals, corporate governance and internal control frameworks have been extensively developed and adopted by corporations worldwide. This study investigates the importance of internal audit in corporate governance and, simultaneously, the degree of importance of the internal auditor regarding corporate governance. An empirical survey was conducted by distributing a questionnaire in Greek firms listed on the Athens Stock Exchange. Regression analysis is used in order to illustrate the gathered information. The findings indicate that internal audit has a great impact on the effectiveness of corporate governance. More particularly, internal audit quality and internal audit senior management support are statistically significantly associated with enhanced corporate governance effectiveness, in contrast to the audit committee independence which is not statistically significant.

Organizational Culture and Patterns of Group Dynamics: Implications for Collective Unethical Behaviour

Recent history in banking reveals a series of unauthorized acting in concert events between traders, their supervisors, and/or firm’s decision makers and executives, resulting in collusive rogue trading. I explore organizational misbehaviour theory and explain one major collusive rogue trading event affecting nine banks, the foreign exchange rate manipulation/forex scandal, through an extended descriptive model. The model comprises organizational/structural, individual, and group forces, which are influenced by behavioural patterns of group dynamics. The model draws conclusions on adverse settings of organizational culture and how banks can set up behavioural risk management and internal control frameworks to prevent collective unethical behaviour.

Uveravanje o internoj kontroli

Increased focus on the roles and responsibilities of senior management and board leads to the fact that many organizations need to put more emphasis on the activities of assuring the effectiveness of the functioning of the internal control system. There are few organizations in the Republic of Serbia that have systematic access to internal control systems at process levels and at the level of the entire organization. Today, the attention of the internal control systems is greater in the world than ever before. The board and senior management should ensure that the overall assurance process is adequate and strong enough to confirm that internal controls are adequately designed and function effectively in accordance with the internal control framework applied.

COSO integrisani okvir i povezanost elemenata interne kontrole

Internal control is a process, established and implemented by management and other employees, with the aim of providing reasonable assurance regarding the achievement of goals in the following areas: efficiency and effectiveness of operations, reliability of financial reporting, compliance with existing laws and regulations and protection property from unauthorized appropriation, use and alienation. There are various methodologies and approaches to internal control, but most often the COSO framework is used. The COSO model is a framework designed to enable the management to confront existing and future risks, and to respond in such a way that risk probability is diminished. The COSO framework has been developed for the needs of the private sector and the standards it contains have become the most widely accepted both in the field of corporate and public sector management. The COSO Integrated Framework contains five interlinked elements: a control environment, an assessment of scripts, control activities, information and communication, and monitoring. The elements of internal control in our legislation are defined in accordance with the integrated internal control framework defined by the Commissions of Sponsoring Organizations - COSO (The Committee of Sponsoring Organizations of the Treadway Commission).

Integrating Internal Control Frameworks for Effective Corporate Information Technology Governance

Abstract This paper analyzes and proposes how several internal control frameworks can be integrated to achieve effective corporate information technology governance. The fundamental tenet of the current literature in this area is that neither a single framework nor non-integrated multiple frameworks would suffice in achieving effective information technology security and governance. Using the extant literature, a deductive approach, and focusing on three popularized internal control frameworks ERM, COSO, and COBIT5, we propose a framework that can help organizations effectively and efficiently achieve information technology governance through their interaction. An integrated framework is one that links the key control objectives to strategic business objectives and, in doing so, addresses IT governance principles at both a strategic and operational level, whilst aligning IT and business management understanding of the key risk areas that characterize the organization’s goals (Goosen and Rudman, 2013). In addition, this fundamental alignment is expected to eliminate unnecessary controls and processes which in turn help improving IT governance. We expect firms seeking to adopt the proper IT governance to utilize the proposed integrated framework.

The Future of Knowledge in the Internal Audit

In the last years the focus of internal audit has shifted away from business toward financial controls. In the future internal audit departments need to align their contributions to the organization’s strategic objectives. The purpose of the internal audit which is organised within the entities is to provide counselling to the general management and to assess the functionality of the internal control system, activities by which it brings an additional value to the entity which is audited. The optimal functioning of the entities on the basis of an integrated internal control framework imposes the existence of a proper control environment which should promote the ethical values, be transparent, accept good practice standards and set responsibilities on the same line with the strategies and policies approved by the superior level management.

OPERATIONAL RISK MANAGEMENT STRATEGIES AND THE GROWTH OF MICROFINANCE SECTOR IN KENYA

Purpose: The purpose of this study was to establish how operational risk management strategies lead to growth of MFI sector in Kenya.Methodology: The study adopted a correlation survey research design. The population of this study was fifty seven (57) MFIs. The sampling frame was the list of MFIs provided in the AMFI website www.amfikenya.com. A sample of thirteen (17) MFIs was selected using the random sampling approach. A questionnaire and an interview schedule were the main data collection tools. Qualitative data was analyzed using content analysis whereas the quantitative data was analysed using Statistical Package for Social Sciences (SPSS) where descriptive and regression analysis were conducted to determine the relationship between enterprise risk management strategies and growth of MFIs.Findings: Findings revealed that the MFI had adequate policies and procedures to manage its operational risks and the MFI had an operations manual. The findings also indicated that the MFIs have adhered to written policies and procedures to manage operational risks in the financial operations area, procurement area, treasury area, and financial management area. Results further indicated that the MFI had effective internal control systems for detecting fraud or other significant operational risks. Finally the study findings indicated that MFI’s internal audit functions ensured effective use of resources, accurate financial reporting, and ample random spot checks of MFI branches, clients, and staff. The regression results indicated that there was a positive relationship between operational risk management strategies and MFI growth.Unique contribution to theory, practice and policy: The study recommends that the MFIs to continue practicing effective operational risk management practices such as internal control framework comprising of policies and procedures. MFIs need to uphold the existence and accessibility of operational manuals. It is suggested that adherence to written policies and procedures is positive strategy and it should be emphasized. The internal audit functions for effective use of resources and accurate financial reporting needs to be emphasized as it had a positive effect on growth. The MFIs should also benchmark their technology with that of banks to reduce human error, to produce timely and relevant data. It is recommended that implementation of know your client (KYC) requirements should be enhanced as it has an effect on growth.

Associations among the Five Components within COSO Internal Control-Integrated Framework as the Underpinning of Quality Corporate Governance

This paper examines the associations among COSO components and how they affect the monitoring function of organisations. Five components of an effective internal control system are described using the framework designed by COSO (1992) and have been selected because they have been identified as underpinning quality corporate governance. Structural equation modelling (SEM) was used first to run confirmatory factor analysis to determine the measurement models for the five COSO components. The COSO report (1992) described the internal control framework as a multidirectional iterative and situational (contingent) process. The primary structural model was designed to reflect the one-way directional associations in the model described and shown in Exhibit 1 within the COSO report (1992). SEM analyses were conducted to test the hypotheses. Additional secondary SEM analyses were undertaken to investigate the reciprocal associations suggested in the COSO report (1992). Findings from the primary SEM analysis provide partial support for associations among the COSO components and enhanced monitoring quality that leads to good corporate governance. The results show that control environment is associated with three dimensions of information and communication (information accuracy, information openness, communication and learning). Additionally, two dimensions of information and communication (communication and learning and information feedback flow) were found to be associated with risk assessment. An indirect association is supported by the results between control environment and risk assessment through the associations among three dimensions of information and communication (information accuracy, information openness and information feedback flow. Risk assessment is associated with control activities, which is subsequently associated with monitoring. The results of the additional secondary SEM analyses supported the reciprocal associations among risk assessment, control activities, or monitoring and dimensions of information and communication, as are suggested in the COSO report (1992). Companies that draw on COSO’s internal control framework should benefit from a better understanding of the direct, indirect, and reciprocal associations among the components of internal control systems. The benefits gained from this better understanding may assist companies to enhance their corporate governance practices that lead to the achievement of operational, financial reporting and compliance objectives.

COSO implementation in Lebanese firms: the impact of organisational culture and leadership value competency on perceived internal control efficiency - an exploratory approach

The purpose of this study is to test the impact of organisational culture and leadership value competency on perceived internal control efficiency in Lebanese firms. The research uses the COSO framework as the basis of assessing internal control framework. And it uses the competing values framework (CVF) model for assessing organisational culture and the Management Skills Assessment Instrument (MSAI) to measure the 12 leadership styles and value competencies. The sample consisted of 225 respondents and was composed of internal audit service providers. The data were collected with the help of questionnaires using a Likert scale ranging from 1 to 5. Results were analysed and revealed that COSO is positively perceived amongst internal auditors in Lebanon as enhancing internal control effectiveness; organisational culture and value orientation had a significant impact on overall perception; and finally that leadership value competencies play a key role in enhancing the positive perception of COSO effectiveness.

Original Internal Control Framework for ERP systems in accordance with SOx 404 compliance and XBRL.

Original Internal Control Framework for ERP systems in accordance with SOx 404 compliance and XBRL.

The Atlanta Public Schools Scandal: Educator Fraud, RICO, And COSO

As the new Chief Audit Executive (CAE) of the school district in Big City, you are interested in the lessons regarding internal control which can be learned from educator fraud (cheating) which occurred in the Atlanta Public Schools (APS) scandal. You discover that educators erased students’ wrong answers and changed them to right answers, that educators made false certifications of test results, and that tests were opened (and resealed) prior to administration. The cheating went on for years. Multiple investigations ensued and the Georgia Bureau of Investigation eventually became involved. About 150 educators resigned, retired or lost their appeals to have their jobs reinstated. Educators who chose to go to trial were prosecuted under the RICO statute (Racketeer Influenced and Corrupt Organizations Act). The APS eventually begun making remediation efforts for the students impacted by false test results. To attempt to prevent such cheating and fraud from occurring again, you relate the facts of the case to both the COSO internal control framework and to the fraud triangle. As CAE, you will use this information to instruct the internal auditors in your department.

Procurement fraud in the US Department of Defense

Purpose This paper aims to explore selected real-world procurement fraud incidents in the US Department of Defense (DoD) and the implications of these incidents to the DoD’s contracting processes and internal controls. Design/methodology/approach This paper analyzes actual procurement fraud incidents and identifies in which phase of the contract management process the fraud occurred and which internal control component was associated with the fraud scheme. Findings The fraud incidents generally occurred during the source selection and the contract administration phases and involved the control activities, monitoring and control environment components of internal control. Research limitations/implications The fraud incidents are analyzed using contract management and internal control frameworks adopted by the US Government. Recommendations are developed for improving contracting processes and internal controls as an approach to deterring and detecting procurement fraud and may be applicable to other international public procurement bodies. Practical implications Governments are ensuring auditability in public procurement as a means of improving agency governance. The research findings suggest that an emphasis on capable contracting processes and effective internal controls should be adopted for fighting procurement fraud. Social implications Ensuring auditability in public procurement has a far-reaching effect in society. The value of capable processes and effective internal controls is gaining much attention in public agencies, as they strive for accountability, integrity and transparency in their governance processes. Originality/value By emphasizing capable processes and effective internal controls, governments can apply a strategic approach to detecting and deterring fraud and thus ensure that government monies are spent in the most effective and efficient ways.

Design of decentralized proportional–integral–derivative controller based on decoupler matrix for two-input/two-output process with active disturbance rejection structure

The framework of the active disturbance rejection internal model control is proposed to solve the problem of the model reduced-order error in the process of the controller design for two-input/two-output system with time delay. In the controller design process of the two-input/two-output system, the decoupler matrix method is used to decompose a multi-loop control system into a set of equivalent independent single loops. Then, a complex equivalent model is obtained, and its order should be reduced for each individual loop. Maclaurin series method is used to reduce the order of the decoupling model. After reducing model order, the proposed method is applied to lessen the effect of the reduced-order error and improve the anti-interference ability and robustness for the control system. Simulation results show that the proposed method possesses a good disturbance rejection performance.

Content Analysis Of Board Reports On Corporate Governance, Internal Controls And Risk Management: Evidence From France

The French legislature has mandated in 2008 that the board chairperson reports on governance, internal controls, and risk management approach with the objective to enhance corporate disclosures to investors. This study examines the content of board chair reports to assess their relevance and compliance with mandated disclosure requirements. Based on a sample of 109 french publicly listed comapnies in 2009, Our results show that, with the exception of banks subject to a more stringent regulatory standard, the mandatory nature of the legislation did not translate in extended disclosures about internal controls and risk management practices. We further observe significant variations among the different indices of disclosure particularly with regards internal accounting and financial control. The multivaraite results validate the influence of the chosen internal control framework as well as firm characteristics on the content of the information disclosed about governance, internal control, and risk management practices.

Internal control effectiveness – a clustering approach

Purpose – This study aims to examine and visualize the adopted internal control structure and effectiveness in firms and present a typology of firms. Control structure and effectiveness are measured based on the assessment of management, rather than using reported material weaknesses as most studies do. This type of evaluation is more purposeful for firms that do not apply the Sarbanes-Oxley Act. Internal control frameworks provide only broad guidance concerning internal control concepts, leaving the details to the adopting firms. Design/methodology/approach – The survey data (from 741 CEOs) are clustered using the self-organizing map, a visual artificial neural network approach. A three-dimensional effectiveness proxy is used. Findings – The analysis reveals four alternative types of internal control effectiveness in firms and visually presents how the components of the internal control structure are associated with each one. A typology of internal control structure and effectiveness is then created. Practical implications – The findings suggest that there are interrelated, but not straightforward, relationships between internal control variables and that there is a link between some of them and higher internal control effectiveness in practice. These findings have important implications for those responsible for improving or assessing internal control, such as management, personnel and internal and external auditors. Originality/value – This paper uses a clustering approach to create a typology for alternative types of internal control structure and effectiveness, based on data from actual firms. Instead of using material weaknesses as a measure, this study uses managers’ own assessments of internal control effectiveness.

Development of a framework to evaluate service-oriented architecture governance using COBIT approach

Nowadays organizations require an effective governance framework for their service-oriented architecture (SOA) in order to enable them to use a framework to evaluate their current state governance and determine the governance requirements, and then to offer a suitable model for their governance. Various frameworks have been developed to evaluate the SOA governance. In this paper, a brief introduction to the internal control framework COBIT is described, and it is used to show how to develop a framework to evaluate the SOA governance within an organization. The SOA and information technology expert surveys are carried out to evaluate the proposed framework. The results of this survey verify the proposed framework.