Internal control system
The Committee of Sponsoring Organizations (COSO) and the Information Systems Audit and Control Foundation are important in providing excellent leadership and direction towards internal control were information abuse and deception is observed for successful risk management and activities control in enterprises (Pickett & Pickett, 2001).
There are five components of internal control system. The first is Control environment which involves everyone in an organization in perfecting its production performance. Every person including the staff, employees and even the management is involved in maintaining the organizational strategies which instills integrity in every place of work for success. The second is Risk assessment which is a process of identifying risks, analyzing their effects and then strategizing the possible ways of avoiding their occurrence. This enables an organization to operate on a safe environment hence high expectations for smooth operations. The third component is Information and Communication, which involves all form of data collection and storage as well coordination of responsibilities within an organization. Through proper information and communication, organizations’ accounting are perfectly maintained while duties are well coordinated hence high production (Pickett & Pickett, 2001).
Controlling activities is the fourth component of internal control system which obligates the management to coordinate operations in an enterprise. This includes controlling financial information and other information systems for accurate circulation and coordination within an organization from the management. Monitoring is the fifth component which evaluates the internal control system performance by considering the current operations and even external information. This gives the management an opportunity to improve or do some adjustments on essential areas which enhances the enterprise production (Barra, 2010).
The most important component of internal control system is control environment since it involves integrity in all people working in an organization. This reduces risks, improves information and communication as well as ensuring self monitoring through the instilled integrity (Chorafas, 2001). Moreover, accountants are usually much concerned about their organization having an effective and efficient internal control system as it ensures good governance through correct financial reporting and compliance with organizational rules, leading to achievement of its goals and objectives (Evans & Lindsay, 2002).
Barra, R. A. (2010). The Impact Of Internal Controls And Penalties On Fraud. Journal of Information Systems, 24(1), 1
Chorafas, D. N. (2001). Implementing and auditing the internal control system. Houndmills, Basingstoke, Hampshire: Palgrave
Evans, J. R., & Lindsay, W. M. (2002). The management and control of quality (5th ed.). Australia: South-Western
Guidance on monitoring internal control systems. (2009). New York, N.Y.: American Institute of Certified Public Accountants
Pickett, K. H., & Pickett, J. M. (2001). Internal control: a manager’s journey. New York: John Wiley
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