Beruflich Dokumente
Kultur Dokumente
AND ETHICS
Lecture 5
Nearchos A. Ioannou
Structure of Lecture
-Internal Controls
- Cybernetic control system
- COSO framework
Internal controls
Internal controls should help the
Important characteristics of
control systems
Fisher has suggested that management
Important characteristics of
control systems(cont)
- Consistency of measures used across the
-
organisation
Whether management actively
intervenes or intervenes by exception
How automatic control mechanisms are
Extent of participation below top
management
Extent on reliance on social relationships
Effectiveness of control
systems
In order for internal controls to
Committee of Sponsoring
Organisations(COSO) of the Treadway
Commission has developed links
objectives with risk management. All
elements of this framework affect
what COSO call the objective
categories
COSO( cont)
These categories are:
- Strategic development
- Operations
- Reporting
- Compliance
COSO( cont)
A significant advantage of the COSO
framework is that it focuses on a
wide concept of internal control and
is not limited to financial control
Limitations of controls
Cost may outweight the benefits
Potential of human error
Collusion between employees
Controls by-passed or overidden by
management
Controls depending on the method of
data processing
1.
2.
3.
3. Monitoring
The internal control system must be monitored. This
element of internal control system is associated with
internal audit
( to be covered later) as well as general
supervision. It is important that deficiencies should be
identified and reported to top management so corrective
actions can be taken.