Beruflich Dokumente
Kultur Dokumente
CONTROL
for Cooperatives
A lecture delivered by Ms. Janirose Z. Fernandez LBP Ilocos
Sur during the 2017 Cooperative Month Celebration
NSCC Plaza, Caoayan Ilocos Sur.
Internal Control
Comprises the plan of organization and all
coordinated methods and measures
adopted within a business to safeguard its
assets, check the accuracy and reliability of
its accounting data, promote operational
efficiency and encourage adherence to
prescribed managerial policies.
2
Internal Control
Internal Control – is the systems, policies, procedures
and processes effected by the BOD, management and
other personnel to safeguard the assets, limit or control
risk and achieve the objectives of the entity.
while
should do it?
11
Auditor
Independence
Reports directly to the board
of directors
Maintains appropriate communication
with the general manager/CEO
Manages the budget and schedule for
the department
Works in a separate and secure space
Direct access to information
12
Components of Internal
Control
Control environment
Risk Assessment
Control Activities
Accounting, information
and communication
system
Self-assessment or
monitoring
13
Assessing the Control Environment
Control Environment – sets the tone of the
Coop, influencing control consciousness of its
people. It is the foundation for all other
component of internal controls
Points of Focus
•Organizational structure assignment of authority and
responsibility
•Human resource policies and procedures
•Integrity and ethical values
•Commitment to competence
•Management philosophy and operating style
Point of Focus
• Risk identification
• Risk analysis and prioritization
• Risk management
15
6. Revise
1. Identify
policies
risks
16
Is the potential
for realization
of the
RISK
unwanted
negative
consequences
of an event
The possibility of loss,
injury, disadvantage or
destruction
17
Types of Major Risks
for Coops
Liquidity Risks
Operations Risk
Credit Risk
18
Assessing Control
Activities
Control Activities – are the policies and
procedures established and implemented to
address the risks and to achieve the Coop’s
objectives.
Point of Focus
• Severity and frequency of audit findings, specifically
on the :
Design of the control
Operating effectiveness of the control
Points of Focus
• Information
• Communication
Points of Focus
• Ongoing Monitoring Activities
• Separate Evaluation*
• Reporting Deficiencies
Assessing the
Monitoring
An effective Monitoring
System detects and
System remedies control deficiencies
throughout the entire
internal control system
22
Minimum
Internal Control
Standards
23
Proper Accounting
Records
Accounting records should satisfy the
needs of a particular financial
intermediary
These should contain sufficient
details to meet management and
supervisory needs and should be
properly and currently posted.
24
Division of Duties and
Responsibilities
26
Dual Routine of each
transaction should
Control be so designed
that at least two
or more
individuals are
involved in the
completion of
every transaction
27
Independent Balancing
This means that someone runs and
balances records that are normally
posted by another person, or that
someone counts
held by another
person
28
Joint Custody
Two or more persons are involved in
the safekeeping of physical
properties including documents
29
Physical Control
Safeguarding and housing
of assets demand adequate
physical protection. Physical
control includes the vault gate keys
of equipment, alarms and other
physical devices to protect the
premises.
30
Number
CoNtrol
Sequence number controls
incorporated in the accounting
system serves two purposed: (a) to
control processing and (b) to identify
individual transactions
31
Knowledge of
Outside Activities
of Employees
Periodic submission of statement of assets
and liabilities ascertains the financial
status of officers and employees
Any immediate or sudden change in
appearance or habits of officers and
employees may be indicative of
misconduct, particularly when the change
reflect spending habits that go beyond the
limit of their income
32
Rotation of Duties
33
This policy is closely related to
rotation of duty as both result to a
forced absence from regular duties.
Vacation for those in position of trust
must be enforced
34
Direct Verification
This pertains to
confirmation of
accounts or
records by means
of direct
correspondence
with the coop’s
customers
35
Sound Personnel
Policies
Recruitment – A formal
procedure must be followed when
employing new people. A check of
their previous employment and
credit references in mandatory in
order to hire individuals of
competence and integrity
Fair Salary Scale – To attract and
keep honest staff
Incentive and other Benefits – to
keep employees morale high
36
Sound Personnel
Policies
Code of Discipline. This should be a
code of discipline that serves as a guide
for the conduct expected of the officers
and employees in their day-to-day
pursuit of company objectives. Code of
discipline must also spell out what
constitutes violations and their
corresponding penalities.
37
Internal Audit-
How is it done?
Develop a comprehensive annual work plan for
board approval, including time schedule, budgets
and scope
Design a generic audit work programs for each
area of Coop operation
Design work papers that clearly document the
evidence of work performed, conclusions drawn,
and meets requirements
Prepare audit report for the board and
management on a timely basis, and provide
status updates at least on a quarterly bases
Follow up on status of implementing
recommendations 38
SAMPLE AUDIT PROGRAM
Office _________________ Audit Date:__________________
Audit Period ____________ Reviewer: ___________________
Source Code: 1 Document, 2 – Interview, 3 - Observation
balance
Confirm the cash is counted periodically
by a supervisor
Review paid transactions for appropriate
period
Confirm that cashbox is reasonably
safeguarded
Ensure segregation of duties in cash
39
Audit Report
Keep it short and to the point
Report on a timely basis
Include four parts, at a minimum:
Incentives/
Opportunity
Pressures
Attitude/Integrity
41
SITUATIONS THAT
OFFER OPPORTUNITY
FOR FRAUD
Ineffective internal controls
Too much trust placed on employees
Employees have detailed knowledge of
the accounting system and its
weakness
Management domination can subvert
normal internal controls
Expected moral behavior is not
communicated to employees (no code
of ethics)
42
SITUATIONS THAT OFFER
OPPORTUNITY FOR FRAUD
43
PROFILE OF A FRAUDSTER
Big spender (expensive hobbies, living beyond
means, high personal debt)
Under stress (suffering from personal crisis
such as financial problems or bad marriage)
Has evident financial needs (illness, drugs,
gambling)
Intelligent (challenged by a secured system,
bored by routines)
44
PROFILE OF
A FRAUDSTER
Inquisitive (tempted by the discovery
of a computer vulnerability)
Risk taker (willing to bend the rules
and take chances)
Rule breaker (takes short cuts, self-
justifies, infractions of law)
Hard worker (first to arrive in the
morning and last to leave at night,
never absent)
45
REMINDERS
ON FRAUD
Internal auditors are not expected
to be fraud specialists
Audit procedures, even if done
with due professional care, do not
guarantee fraud detection
Detection of Fraud is only a by-
product of the audit function, not
its main goal 46
Thank You!