Task11-1control

ACCA
Task 11-1
Control, security and audit Instructor: Alice
Internal control environment and procedures Internal control systems
Contents
Internal control systems
Internal controls
•Help organisations counter risks.
•Help maintain the quality of reporting and comply with laws and regulations.
•Consist of actions taken by management to ensure objectives and goals will be achieved.
Internal control systems
The internal control system consists of:•Control environment –overall context •Control procedures –detailed controls Supported by:
•Information and communication processes •Monitoring
Internal control systems Limitations include:
•Potential for fraud or human error •Collusion to circumvent the systems •Management override
•Cost v benefits
Example question
Which of the following is not an aim of internal controls?
A.To enable the organisation to respond appropriately to
business, operational and financial risks
B.To eliminate the possibility of impacts from poor
judgement and human error
C.To help ensure the quality of internal and external
reporting
D.To help ensure compliance with applicable laws and
regulations
Internal control environment and procedures The control environment
This is the overall attitude, awareness and actions
of directors and management regarding internal
controls and their importance.
Reflected in the philosophy and operating system
of the organisation.
Internal control environment and procedures
The elements of a strong control environment:
a. Clear strategies for dealing with risks
b. Company culture supports risk management
c. A climate of competence, integrity and trust
d. Clear definition of authority and accountability
e. Clear communication to employees
f. People manage risks effectively
Internal control environment and procedures The classification of control procedures Classification Comment
Administration Channels of communication and
reporting responsibilities
Accounting Recording transactions and establishing
responsibilities for records
Prevent Prevent errors from happening in the
first place
Detect Detect errors happened
Correct Minimising the effect of errors(back-up)
Internal control environment and procedures Other classifications
a. Discretionary and non-discretionary
b. Voluntary and mandated
c. Manual and automated
d. General
e. Application (prevent, detect and correct errors)
f. Financial
Example question
Some controls are provided automatically by the system and cannot be by-passed, ignored or overridden: for example, having to input a password to enter a computer system. These are classified as
_______ controls.
Which term correctly completes the statement?
A. Detect
B. Mandated
C. Non-discretionary
D. Administrative
Internal control environment and procedures Types of financial control procedure——“SPAMSOAP”
a. Segregation of duties
b. Physical
c. Authorisation and approval
d. Management
e. Supervision
f. Organisation
g. Arithmetical and accounting
h. Personnel
Internal control environment and procedures Internal checks
Internal checks are the checks on the day-to-day transactions Arithmetical internal checks include:
a. Pre-list
b. Post-list
c. Control totals
Internal control environment and procedures Characteristics of a good internal control system •Clearly defined organisation structure
•Adequate internal checks
•Acknowledgement of work done
•Physical security
•Formal documentation
Review
Internal control systems
Internal control environment and procedures
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