Internal Control Structure

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Internal Control Structure Control Environment In the process of ensuring a business meets all its objectives, an effective attitude towards the internal control procedures is necessary by management. This can be achieved through communication and enforcement of integrity and ethical values. Communication of internal control measures is vital amongst employees therefore the appropriate method to promote entity values and behaviour standards amongst employees is to implement policy statements through codes of conduct and by lead example of those who create, administer and monitor them. For an effective internal control system to be in place the system cannot be greater than the level of integrity and ethical values of the personnel that overlook the system. Another method is to have a commitment to competence. A competent employee has the knowledge and skills necessary to complete specific jobs. Managers must consider if the person that they have chosen for a specific job actually has the required skills and knowledge to get it done. Therefore effective human recourses policies and procedures are required for recruiting to ensure people employed have adequate skills and knowledge. Information System Internal control systems are dependent on the reliability, timeliness and frequency of adequate information being available for management’s decision making. To ensure information is correct the person in charge must identify and record all valid transactions. By doing this all transactions are then clearly classified and dated. Another internal control is to classify, summarise and report information on a timely basis. This ensures all reports are classified and summarised correctly and are reported on time. E.g. Bank reconciliations at the end of day. Monitoring of controls Every internal control system has to be monitored regularly to ensure it

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