8. Internal control systems

Question 1

Define internal control?

What are the objectives of internal control

Answer 1

Internal control:‘Is a process effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives, reporting and compliance.’

2 main sources of guidance:

1. COSO
2. Turnbull

Objectives of Internal Control R.O.R.C.S

• A system of internal control has a key role in the management of risks
• Effectiveness and efficiency of operations.
• Ensure the reliability of internal and external reporting.
• Assist compliance with laws and regulations.
• Safeguard the shareholders’ investment and the company’s assets.

Question 2

4 Types of controls

Answer 2

1. Prevent
2. Detect
3. Correct
4. Direct

Question 3

What are the commonly used control procedures?

Answer 3

Control procedures: The activities that make up any system of internal control

APIPS: The most common forms of control activity:

• Authorisation;
• Performance reviews;
• Information processing;
• Physical controls;
• Segregation of duties.

Question 4

What are the Qualities of good information?

Answer 4

2.1.3 Qualities of good information: ACCURATE

• Accurate
• Complete
• Cost beneficial
• User targeted
• Relevant
• Authoritative
• Timely
• Easy to use