Thesis internal control systems

However, current context still shows that despite the fact that there Is presence of a system of controls in companies, financial performance is vague in most of these companies Sarens, Therefore, this study is carried out in order to examine the constant bad financial performance from the view of internal controls which are being avoided up till now. The investigators also believe that precious advantages to administration and those in charge of supremacy in organizations of higher learning will appear on how to rationalize the systems of internal controls hence making sure the improvement of financial performance and eventually make certain the accomplishment of all the aims of organizations.

Internal Control Procedures

The research will also add up to the present information bank related to internal controls. The study was limited to banking sector of Pakistan. The research was carried out in Islamabad city and was aimed at the workers of banking sector located in Pakistan. On the other hand, for reasons of the given research, the study would only be concentrating on the three elements of the internal control system. Those are the control environment; internal, control activities and internal audit. Rest of the elements is held stable. According to Garcia , internal control as the scheme of company and all the procedures and ways taken up by the administration of a unit to help in accomplishing management aims of making certain as long as possible, the orderly and effective conduct of its business, counting in devotion to administration strategies, the security of assets, avoidance and exposure of scam and mistakes, the precision and fullness of all the records and the compilation of economic knowledge and data through reliable and trustable sources.

Internal control systems not only play a role in administrative efficiency but also contribute to essential tasks of company boards of directors Watts, According to Johnson , there are two important kinds of internal controls linked with the administration of huge businesses, especially varied businesses, which have a really major impact on company novelty, those are; financial controls and strategic controls.

Mainly slanted and at times, instinctive criterions for evaluation are highlighted through strategic controls.

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In order to make use of strategic controls, business administrators need to have quite some knowledge regarding business level markets and operations. There is also a requirement of a strong data exchange among divisional and corporate managers.

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This method could be challenging when the level of interdependence between business groups is great. These variations make it very complicated for directors to utilize strategic controls. To decrease the demands of information processing, they might alter their stress from strategic to financial controls Krishan, Goodwin believes that the control environment establishes the tendency of the company by impacting the control awareness of the individuals.

They furthermore declare that control environment is known as the basic groundwork for all the other elements of internal control. Control environment factors are comprises of: honesty and moral values of workers responsible for manufacturing, managing and observing the controls, dedication and capability of persons practicing duties that one is assigned to, directors or inspection groups particularly the degree of their autonomy from administration, importance and experience, management idea and style of working in terms of their fierceness which might detect the degree of threat they face and industrial structure, which could be a well-established structure that offers for right plotting, managing and monitoring functions or an incompetent structure that might only supply in order to create confusion among the main players by making vague parts.

Donald recommends that internal inspection is practiced as part of the observation activity of a company.

Accounting, Auditing and Management Control - TSM Doctoral Programme

It includes the appreciation and examination of internal controls and the effectiveness of which the certain departments of the company are carrying out their tasks. The internal inspector usually gives reports to the high management. On the other hand, Curtis believes that internal examiner is a free assessment function founded a company to investigate and estimate its actions as a service to the company. The aim of the internal investigator is to help members of the company in the significant release of their duties.

A study conducted by Ejoh, focused control systems relying on the poor security networks. The researcher believed an efficient check and balance of overall financial transactions is necessary for internal controls systems. Furthermore efficient and effective security system is key to reducing theft, and loss of property. Al-Matari, while researching on the effect of internal audit on firm performance suggested the key characteristics of internal audit department increase the overall firm productivity such as ; professional qualifications of the chief audit executive of the Internal Audit , size, experience , and qualification.

Micheal states that there has to be a strong internal control system and the internal investigator has to confirm the operations of the system in much the similar method, as the external auditor. It includes the examination, footage, recognition and view of fulfillment tests of control, they also disputed that efficient internal investigator processes offer enough appropriate and trustworthy proof so as to identify and putt off the scam.

He believes that if management was overriding control features in order to manage earnings, then one would expect to find more Internal Control Weaknesses related to general controls, even if the specific account-level controls are effective. On the other hand, a stronger argument could be made that if general controls are in place and working, then one would expect to find less Internal Control Weaknesses related to general controls.

Agency Theory describes firms as necessary structures to maintain contracts, and through firms, it is possible to exercise control which minimizes opportunistic behavior of agents. Accordingly, Menon posit that in order to harmonize the interests of the agent and the principal, a comprehensive contract is written to address the interest of both the agent and the principal.

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  8. They further explain that the relationship is further strengthened by the principal employing an expert to monitor the agent. Among questionnaires distributed were collected back.

    Internal Controls Essay

    Feedback forms were contributed to both male and female. Convenient sampling method was used. Five items were about control environment, five were about internal audit, whereas five were about control activities and the rest of five about financial performance. Watts, suggested that Internal controls are necessary for achieving financial and economic objectives, hence leading to better financial performance. Furthermore Garcia suggested that effective control systems are key for conducting orderly and effective business.

    Based on much literature support in this paper the below hypotheses were generated: H1: Control environment has a significant positive impact on Financial performance. H1: Internal audit has a significant positive impact on Financial performance. H2: Control activities have a significant positive impact on Financial performance. To check the impact of the independent variable on the dependent variable, regression analysis was used.

    Correlation analysis was used to verify the connection between independent and dependent variables. Scale dependability analysis for the survey was done by discovering the Cronbach's alpha figure by scale research SPSS. This study was done by a survey and was carried out by an opinion poll. The questionnaires were divided among the participants individually among the employees of banking sector located in Islamabad.

    Following is the results and findings from these tests: 4. It gives a 0. Appropriate questions are asked in the survey. The outcomes of the reliability and validity experiments reveal that the instrument used for this survey is reliable and valid as it give the Cronbach's alpha value 0. The internal control system is designed to identify and avert fraud, material misstatements and errors and omissions.

    No internal control system, however elaborate, can be by itself guarantee efficient administration and completeness and accuracy of the records nor can it be proof against fraudulent collusion, especially on the part of those holding positions of authority and trust. This is mainly due to the following inherent limitations of an internal control system:. As a result certain important controls might not be put in place due to the costs involved. This leaves gaps that can be exploited.

    Specific internal control procedures include:. Let's see if we can help you! These are procedures within the accounting function, which check that transactions are authorized, correctly and accurately recorded. This is aimed at ensuring completeness and accuracy of the accounting records.

    Effectiveness of Internal Control System as a Quality Control Mechanism in Public Organizations

    These procedures can be implemented through the following ways: Godwin Segregation of duties also covers internal check which refers to the activities of one person must be complementary to the activities of another or subjected to independent checking. Signs that an internal control system may be lacking include but are not limited to such factors as: management failing to exercise appropriate due care and correct supervision of staff. Another sign that indicates a lack of internal control is that lack of segregation of duties is evident. This consequently implies that members of staff have access to tasks and are performing them and this is causing contradictions in the regular allotted duties.

    These errors of omission usually result in erroneous ratio analyses which consequently cause management to make unsuitable decisions based on financial information that contains inaccuracies. Chorafas, D.

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    Implementing and auditing the internal control system. Spencer, H. The Internal Audit Handbook.

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