Internal Control.ppt

1、May 2009,Internal Control - An Overview,1,Internal Control,An Overview John M. Fuchko, III, MBA, CIA, CCEP Chief Audit Officer Controls as one of the four basic functions of management; Why we need internal controls; and, Risk.,May 2009,Internal Control - An Overview,5,Managements Role,Managements r

2、ole is to provide leadership that the organization needs to achieve its goal and objectives. Internal control is a technique used by managers to help an organization achieve these objectives.,Internal control is . . . a technique used by managers to help an organization achieve its goal and objectiv

3、es.,May 2009,Internal Control - An Overview,6,Four Basic Functions of Management,Internal control is this 4th function. Adequate internal controls allow managers to delegate responsibilities with reasonable assurance that what they expect to happen, actually does. Managers must develop internal cont

4、rols for each activity for which they are responsible.,May 2009,Internal Control - An Overview,7,Why do we need Internal Controls?,To Provide Accountability . . . Public sector managers are responsible for managing the resources entrusted to them to carry out government programs.,. . . And to Encour

5、age Sound Management Practices Internal controls coordinate a departments policies and procedures to safeguard its assets, check accuracy and reliability of data, promote operational efficiency, and encourage adherence to sound management practices.,May 2009,Internal Control - An Overview,8,Risk,Wha

6、t is Risk? Risk is the probability of an event or action having an adverse effect on your organization. Examples of Risk include the risk that: Operations are not operating effectively/efficiently; Financial and operating reports are unreliable; Assets are not adequately safeguarded against loss; Op

7、erations are not in compliance with laws, rules, and, Units missions or goals are not achieved.,May 2009,Internal Control - An Overview,9,What are the affects of uncontrolled risk?,May 2009,Internal Control - An Overview,10,What factors affect risk?,Many factors affect the significance of a particul

8、ar risk. Risk is controlled by reducing or otherwise impacting these factors. Factors include: Ethical Climate maintained by management; Degree of computerization; Adequacy and effectiveness of the System of Internal Control; and, Degree of Regulation.,May 2009,Internal Control - An Overview,11,Inte

9、rnal Control An Overview,This section includes a discussion of: Definition of internal control; Distinction between administrative and accounting controls; Limitations of internal controls; Biggest threats to the internal control structure; Four basic types of controls; and, Five specific control me

10、thods.,May 2009,Internal Control - An Overview,12,Definition of Internal Control,Categories: Effectiveness and efficiency of operations; Reliability of financial reporting; and, Compliance with applicable laws and regulations.,Internal control is . . . a process, effected by an entitys board of dire

11、ctors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:,May 2009,Internal Control - An Overview,13,Distinction Between Administrative and Accounting Controls Five Components of the COSO Report; and, Hard an

12、d Soft controls.,May 2009,Internal Control - An Overview,22,Introduction to COSO,Significance of COSO . . . First consensus definition for internal control; Defined internal control broadly rather than restricting to financial or accounting terms only; and, Suggested guidelines for evaluating the ef

13、fectiveness of an entitys system of internal control.,May 2009,Internal Control - An Overview,23,MONIT,ORING,CONTROL,ACTIVITIES,RISK,ASSESSMENT,CONTROL,ENVIRONMENT,Internal Control Components,Source,: Internal Control - Integrated Framework, September 1992, Committee of Sponsoring,Organizations of t

14、he Treadway Commission, p.13,The,control environment,provides an atmosphere in which people conduct their activities and carry,out their control responsibilities. It serves as the foundation for the other components. Within this,environment, management,assesses risks,to the achievement of specified

15、objectives.,Control,activities,are implemented to help ensure that management directives to address the risks are,carried out. Meanwhile, relevant,information,is captured and,communicated,throughout the,organization. The entire process is,monitored,and modified as conditions warrant.,Information Des

16、cribing internal control systems; Walk-throughs; Testing of the system; and, A COSO or five-step approach to evaluating internal controls.,May 2009,Internal Control - An Overview,27,Cost/Benefit Considerations in Setting Management and Control Objectives,May 2009,Internal Control - An Overview,28,De

17、scribing Internal Control Systems,There are three methods commonly used to describe internal control systems: Narrative descriptions that detail operations step by step. Flowcharts consisting of either vertical or horizontal flowcharts (see examples on following slides) Internal Control Questionnair

18、es,May 2009,Internal Control - An Overview,29,Horizontal Flowchart,COURT,POABF,DEPARTMENT,OF REVENUE,COUNTY,Court receives traffic case, hold,hearing and assesses fine and,additional 10% POPTF fee and,other add-on fees,Clerk receives payment for fine/,fees and remits this payment and,form showing br

19、eakdown of,payment to county,County manager receives,payment from clerk and,records showing,distribution of fines and,fees for use in paying to,appropriate state,authorities,County manager prepares,report showing POPTF,fees received and a check,remitting those fees to,send to POABF,POABF receives re

20、port,and check for fees from,county and other counties,in Georgia also remitting,POPTF fees,POABF prepares,summary report and,check on monthly basis,remitting all POPTF fees,received in that month for,remittance to the,Department of Revenue,Department of Revenue,receives report and,POPTF fee remitta

21、nce,and deposits funds,1,1,Example of Control Point,Clerk checks 10% POPTF fee,assessment and other add-on fees,to ensure they were calcuated in,accordance with the law.,May 2009,Internal Control - An Overview,30,Calculate 10%,additional fee,amount owed,based on fine,amount.,Is probation part of,sen

22、tence?,Assessment,Criminal or Traffic,Conviction?,Civil Court,Transaction?,Calculate amount,owed for each,DUI/Drug,probation fee,No,Yes,Can amount be,paid in full?,Yes,No,Send to Probation,and set up,payment plan,No,Monthly, remit,payments to fee,recipients,Collect total,amount due.,Do fees apply?,N

23、o further,action,required,No,Yes,Collect total,amount due.,Yes,Yes,Collection,No,Inform payee of,total amount,due.,Remittance,Vertical Flowchart,Calculate 10%,additional fee,amount owed,based on fine,amount.,Probation collect,total amount due,either in full or,partial payments.,May 2009,Internal Control - An Overview,31,Walk-throughs and Testing of the System,Walk-throughs consists of both Procedural walk-throughs (allows auditor to go step by step through process); and, Docum