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Session 1 & 2

INTERNAL CONTROL. Session 1 & 2. COSO, the Committee of sponsoring organizations of the tradway commission is a private sector institute established in 1985. Committee comprises of: The Institute of Internal Auditors American Institute of Certified public Accountants

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Session 1 & 2

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  1. INTERNAL CONTROL Session 1 & 2

  2. COSO, the Committee of sponsoring organizations of the tradway commission is a private sector institute established in 1985. Committee comprises of: • The Institute of Internal Auditors • American Institute of Certified public Accountants • American Accounting Association • Institute of Management Accounts • Financial Executives Institutes

  3. COSO goal is to improve the quality of financial reporting through a focus on corporate governance, ethical practices and internal control.

  4. COSO’s definitions of internal control is as follows: A process, effected by an entity’s board of directors, management, other personnel designed to provide reasonable assurance regarding the achievement of the objectives.

  5. INTOSAI defines the Internal Control as an integral process that is effected by an entity’s management and personnel and is designed to address risks and to provide reasonable assurance that in pursuit of the entity’s mission, the following general objective are being achieved.

  6. Executing orderly, ethical. Economical, efficient and effective operations • Fulfilling accountability obligations • Complying with applicable laws and regulations • Safeguarding resources against loss misuse and damage

  7. Internal Control is a dynamic integral process. Management and personnel at all level have to be involved in this process to address risks and to provide reasonable assurance of the achievement of the entity’s mission and general objectives.

  8. Reasonable assurance recognizes that the cost of internal control should not exceed the benefit derived. • Some time cost may appear excessive, but they may be critical to maintaining public confidence in Government and related organization.

  9. Internal controls are designed to achieve following general objectives:- Executing Orders: Means in well organized way, methodical. It is synonymous to executing work systematically. System comprises of men, material, method etc.

  10. Ethical :- General expectations are that public servants should serve the public interest with fairness and manage public resources properly. Citizens should receive impartial treatment on the basis of legality and justice.

  11. Economical : means that the broad principles of orthodox finance are borne in mind not only by disbursing officers but also by sanctioning authority. The expenditure not merely conform to rules or orders of competent authority but extends beyond formality to its wisdom, faithfulness and economy.

  12. Efficient: refers to the relationship between the resources used and the outputs produced to achieve the objectives. An efficient operation produces the maximum output for any given set of resource inputs.

  13. Effectiveness: refers to entire gamut of the programme, scheme or project, right from the conception to execution, commissioning, ultimate operation and functioning/performance is covered in such a appraisal.

  14. Fulfilling accountability obligations. Accountability is a process whereby public service organizations and individuals within them are held responsible for their decisions and actions including their stewardship of public funds, fairness, and all aspects of performance.

  15. It compasses: • Fiscal accountability • Managerial accountability • Programme accountability

  16. Compliance with laws and regulations Strict adherence to laws and regulations in expending/receiving public funds creates confidence in people at large, and therefore it is essential that laws/regulations applicable are followed.

  17. Safeguarding resources against loss, misuse and damage due to waste, abuse, mismanagement, error, fraud and irregularities. Government expenditure generally embody public money and their use in public interest required special care. Whether effective control exists over physical custody of goods, cash investment scripts and fixed assets.

  18. Limitation on Internal control effectiveness • Human factor • Resource constraints • Organizational changes and management attitude.

  19. Internal Control consists of five interrelated components • Control environment • Risk assessment • Control activities • Information and communication • Monitoring

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