In Accounting, What Is Internal Control?

The more classic abroad is the ASB's definition of internal control. In 1972, the Auditing Standards Announcement made by the American Board of Auditors (ASB), which followed research and discussion along the lines of the Securities Exchange Act, proposed the following definition of internal control: "Internal control Under the environment, in order to improve the operating efficiency, fully and effectively obtain and use various resources, and achieve the established management goals, the organization, plans, procedures and methods of various constraints and adjustments implemented within the unit.

Basic Information

Chinese name

Internal Control

Foreign name

Internal Control

Time

1972

Writing

Audit Standards Announcement

in accordance with

Securities Exchange Act

The so-called internal control refers to the protection of a unit in order to achieve its business objectives.

In the internal control management work, have you encountered the following situations:

When the finance department approves the travel expenses or social entertainment expenses of the sales department, I always hear the sales staff complaining: the review is too strict, we are in charge of the front, and you are pulling us on the back.

In the process of bidding for suppliers, the procurement department thinks that everything is done in accordance with the rules and regulations of the procurement department. How come the legal department or the management department, and the selected supplier can't be approved?

Company management talks about risk every day. Why do employees have no concept of risk? Whether leadership is alarmist, or risk management and control is a matter for leadership.

The system has been integrated and the process has been updated, but in the process of implementation, I feel more troublesome and spend more time than before.

There must be many similar confusions and problems, which are closely related to the internal control and risk management system of the enterprise.

• Master advanced theories of internal control, risk management, professional fraud and internal audit

• Master the method of rapid diagnosis of internal control defects of enterprises, evaluate the effectiveness of internal control and make improvements

• Improve management's ability to self-assess internal control and establish an effective internal control environment

• Define how to integrate the company's own characteristics and establish an internal control system suitable for the company's own situation

• Help students identify the control points, control standards and control methods in the main business activities through typical examples of business operations

Analysis of common reasons for enterprises lacking internal control A comprehensive introduction to internal control-related theories The essence of internal control in the control environmentRisk management Internal control activities Introduction to internal audit Introduction and establishment of internal control

The establishment and implementation of effective internal control of an enterprise shall include the following elements ^[2]

Including controlling the environment,

Internal control is an inevitable product of social and economic development. It is continuously enriched and developed with the intensification of external competition and the need to strengthen internal management. Throughout

1. The principle of legitimacy means that the enterprise must take the laws and regulations of the country as the criterion and, within the scope of national rules and regulations, formulate its own practical financial control system.

2. The holistic principle means that the internal financial control of an enterprise must fully involve the control of all aspects of the company's financial and accounting work. It must conform to the long-term planning of the enterprise and pay attention to its short-term goals. Internal control is coordinated.

3. The principle of pertinence refers to the establishment of an internal control system based on the actual situation of the enterprise and the establishment of a practical and effective internal control system for weak points in the company's financial and accounting work, and effective control of various links and details to improve the financial performance of the company. Accounting level.

4. Consistency principle means that the financial internal control system of an enterprise must have continuity and consistency.

5. The principle of adaptability refers to the fact that the internal financial control system of an enterprise should timely supplement the internal financial control system of the enterprise according to the changed circumstances of the enterprise and the development of the financial accounting profession and social development.

6. The principle of economics means that the establishment of an enterprise's internal financial control system should consider the cost-effectiveness principle, which means that the financial control system of an enterprise must be operable and practical.

7. Developmental principles. When formulating the internal financial control system of an enterprise, it is necessary to fully consider the macro policies and the development of the enterprise, closely observe the movements of competitors, and formulate developmental or future-oriented rules and regulations.

Internal control mainly refers to internal management control and internal accounting control. The internal control system helps the enterprise to achieve its business objectives. With the establishment of the socialist market economy system, the role of internal control will continue to expand. At present, it mainly plays the following roles in economic management and supervision:

1.Improve the accuracy and reliability of accounting information

In order to effectively manage the operating enterprise in the fast-changing market competition, the decision-makers of the enterprise must grasp all kinds of information in time to ensure the correctness of the decision, and can use control means to maximize the accuracy and authenticity of the information obtained. Therefore, the establishment of an internal control system can improve

The focus of the internal control system is strict accounting management, the design of reasonable and effective organizations and division of duties, and the implementation of standardized business processing procedures with clear job responsibilities. According to its scope of action, it can be roughly divided into the following two aspects:

According to the "Basic Standards of Enterprise Internal Control" [2008] No. 7, internal control includes five major objectives: to ensure reasonable legal compliance of business operations and management, asset safety, financial reports and related information to be true and complete, improve business efficiency and effectiveness, and promote enterprise realization. development strategy.

Reporting objective : reliability of internal and external reporting

Business objectives : To respond appropriately to risks and promote operational efficiency and effectiveness (provide reasonable guarantees for the achievement of corporate goals)

Compliance objectives : laws and regulations, internal policies for business practices

Internal control of an enterprise is an important means of modern enterprise management. The effectiveness of internal control is directly related to the success or failure of an enterprise. The implementation of an effective internal control system in an enterprise will help promote the expansion of production and increase economic efficiency. The following is a brief introduction on how to establish an internal control system for an enterprise:

1. Improve management laws and regulations and company systems

The internal control of enterprise management depends to a large extent on the supervision of rules and regulations, and the degree of supervision is related to the relevant laws and regulations promulgated by the state and the system formulated by the company. Therefore, national laws need to clarify various rights and responsibilities in the financial management of various industries, and strictly punish illegal acts. At the same time, continuously improve various rules and regulations to accelerate the effective implementation of various management; corporate managers need to clarify Work responsibilities and requirements to ensure the smooth implementation of work and management.

2. Organizational control

The control of the organizational structure includes the establishment of the organizational structure, the scientific nature of the division of labor, the departmental post responsibility system, and the control of personnel quality. When setting up an internal organization, enterprise managers must consider both the needs of the work and the needs of internal control to make the organization settings both refined and reasonable. Therefore, there must be an overall plan for the internal organizational structure and division of responsibilities.

3. Budget control

Budget control is an important part of internal control, and its content can cover the entire process of an enterprise's operating activities, including financing, purchasing, production, sales, and investment. Therefore, enterprise managers carry out budget control, which is an overall plan for annual revenue and expenditure of operations, capital, and finance, which is prepared in order to achieve the stated goals of the enterprise.

4. Risk prevention control

In a market economy, enterprises will inevitably encounter various risks. Therefore, in order to prevent and avoid risks, enterprise managers should establish a risk assessment mechanism. Common risk assessment contents of enterprises include funding risk assessment, investment risk assessment, and credit risk assessment.

5. Property security control

All kinds of property and materials of an enterprise can be accessed or disposed of only after authorization to ensure the security of the assets. The main contents are: (1) Restricting access to assets. Only personnel authorized by the company's managers can access cash, other readily realizable assets, and inventory assets. (2) Take physical inventory regularly. Enterprise managers have established a regular inventory system for assets. They should investigate the differences in inventory and analyze the causes and responsibilities for inventory losses. (3) Property insurance. Enterprise managers increase the chance of compensation for physical damage by insuring the assets, thereby protecting the security of the physical goods.

The establishment and implementation of internal control of an enterprise shall follow the following principles ^[2]

Cashier receipt

The core of an enterprise's internal control is control activities. Control activities are the methods and means to ensure that internal control objectives can be achieved based on the results of risk assessment and risk response strategies. Enterprise internal control measures usually include risk control, separation of incompatible positions, authorization approval, accounting system control, property protection control, budget control, operational analysis control, performance evaluation control, etc. An enterprise should combine the results of risk assessment, and use manual control and automatic control, preventive control and discoverable control, and use corresponding control measures to control the risk within an acceptable level.

1. Risk control. Risk control requires the unit to establish a sense of risk, establish an effective risk management system for each risk control point, and comprehensively prevent and control financial risks and operating risks through measures such as risk early warning, risk identification, risk assessment, risk analysis, and risk reporting. .

2. Incompatible post separation control. The control of separation of incompatible positions requires the principle of separation of incompatible positions of units, the reasonable establishment of accounting and related positions, clear responsibility and authority, and the formation of a mutual check and balance mechanism. It mainly includes: authorization and approval, business management, accounting records, property storage, audit and inspection.

3. Authorize approval control. Authorization approval control requires the unit to clearly specify the scope, authority, procedures, responsibilities, etc. of the authorization approval related to accounting and related work. Management at all levels within the unit must exercise authority and assume responsibility within the scope of authorization. Handle business within the scope of authorization.

4. Accounting system control. Accounting system control requires the unit to formulate an accounting system suitable for the unit in accordance with the Accounting Law and the country's unified accounting system, to clarify the processing procedures for accounting vouchers, accounting books and financial accounting reports, and to establish and improve accounting archives storage and accounting work handover measures , Implement the accountability system of accountants, and give full play to the accounting supervision function.

5. Budget control. Budget control requires the unit to strengthen the management of budget control, execution, analysis, and assessment, clarify budget items, establish budget standards, regulate budget preparation, review, release, and implementation procedures, analyze and control budget differences in a timely manner, and take improvement measures to ensure Budget execution. Funds in the budget are subject to approval by the responsible person, and funds above the limit are subject to collective approval. Strictly control capital expenditure without budget.

6. Property security control. Property security control requires units to restrict direct access to property by unauthorized persons, and adopt measures such as regular inventory, property records, account verification, and property insurance to ensure the safety and integrity of various properties.

7. Internal report control. The internal report control requires the unit to establish and improve the internal reporting system, comprehensively reflect the status of economic activities, provide important information in business activities in a timely manner, and enhance the timeliness and pertinence of internal management.

8. Automatic system control. With the rapid development of information technology, most enterprises have their own information systems, and they should use automatic system control instead of manual control.

Reasons why the internal control system cannot be effectively implemented

1. The system itself has been formulated unreasonably, or is too idealistic, or with the emergence of new circumstances, the original system has been unable to adapt but has not been modified in a timely manner, thereby making the system inoperable and naturally not being implemented;

2. Lack of a mechanism to ensure the implementation of the system. Some units have neither inspected nor supervised the implementation of internal control, nor have corresponding incentive measures.

It is not surprising that the control system became a wall display and a piece of paper.

To this end, enterprises need to improve the operability of the system on the one hand, and strengthen the system on the other.

The general methods of internal control usually include division of responsibilities, authorization control, audit approval control, budget control, property protection control, accounting system control, internal report control, economic activity analysis control, performance evaluation control, and information technology control.

1. The division of responsibilities and duties requires that the functional departments and positions be reasonably set up in accordance with the goals, functions and tasks of the enterprise, in accordance with the principles of science, simplification, and efficiency. Responsibility, easy assessment, and mutual restraint.

In determining the division of responsibilities, enterprises should take full account of the checks and balances required for the separation of incompatible positions. Incompatible jobs usually include: authorization and approval, business management, accounting records, property custody, audit and inspection.

2. Authorization and control requires enterprises to clarify the scope of authority, approval procedures and corresponding responsibilities of each department and post for economic business and matters according to the division of responsibilities. Management personnel at all levels within the enterprise must exercise their powers and responsibilities within the scope of authorization, and business operators must conduct business within the scope of authorization.

3. Review and approve controls, requiring each department and post of the enterprise to review and review the authenticity, compliance, rationality, and integrity of relevant data and related economic operations and matters in accordance with the prescribed authorizations and procedures, and sign opinions And sign or seal and make a decision on approval, disapproval or other processing.

4. Budget control requires enterprises to strengthen the management of budget preparation, execution, analysis, assessment and other links, clarify budget items, establish budget standards, standardize budget preparation, review, release and execution procedures, analyze and control budget differences in a timely manner, and take Improvement measures to ensure the implementation of the budget.

5. Property protection control requires enterprises to restrict direct contact and disposal of property by unauthorized persons, and adopt measures such as property records, physical storage, regular inventory, account verification, and property insurance to ensure the safety and integrity of property.

6. Accounting system control requires enterprises to formulate an accounting system suitable for the enterprise in accordance with the "Accounting Law of the People's Republic of China", "Enterprise Accounting Standards" and the country's unified accounting system, and clarify accounting vouchers, accounting books and financial accounting reports and related information Disclosure processing procedures, standardization of accounting policy selection standards and approval procedures, establishment and improvement of accounting file storage and accounting handover methods, implementation of the accountability system for accountants, and full use of accounting supervision functions to ensure that corporate financial accounting reports are true, accurate, complete.

7. Internal report control requires enterprises to establish and improve internal reporting systems, clarify procedures for the collection, analysis, reporting and processing of relevant information, provide important information in business activities in a timely manner, fully reflect the status of economic activities, and enhance the timeliness and effectiveness of internal management. Targeted.

Internal reporting methods usually include: routine reports, real-time reports, special reports, comprehensive reports, etc.

8. Analysis and control of economic activities requires enterprises to comprehensively use information on production, purchase and sale, investment, finance, etc., and use methods such as factor analysis, comparative analysis, and trend analysis to analyze the business management activities of the enterprise on a regular basis, find existing problems, and find out Reasons, and put forward suggestions for improvement and countermeasures.

9. Performance evaluation control requires enterprises to scientifically set performance evaluation index systems, and to evaluate and evaluate the current performance of various departments and employees against performance indicators such as budget indicators, profitability levels, investment returns, and production safety targets, to honor rewards and punishments, and strengthen Incentives and constraints for various departments and employees.

10. Information technology control requires enterprises to combine the actual situation and the degree of application of computer information technology to establish an informatization control process that is compatible with the operation and management of the enterprise, improve business processing efficiency, reduce and eliminate human manipulation factors, and strengthen computer information Control of system development and maintenance, access and change, data input and output, file storage and storage, network security, etc., to ensure the safe and effective operation of the information system.

11. Internal control related to financial reporting. Internal control is defined as a process designed and supervised by the company's chief executive officer and chief financial officer or similar personnel, and implemented by the company's board of directors, management and other relevant personnel To provide reasonable assurance as to the reliability of the financial report and whether the preparation of the financial report disclosed in conformity with generally accepted accounting standards. This process includes the following policies and procedures:

The company's relevant records accurately and fairly reflected the company's records of transactions and the disposal of assets to a reasonable extent.
The company's record of related transactions can provide reasonable assurance for the company to prepare financial reports in accordance with generally accepted accounting standards, and the company's income and expenses have been authorized by the company's management and directors.
· Able to prevent and timely discover illegal acts that have a significant impact on financial reporting, such acts include the illegal possession, use and disposal of company assets.

Comprehensive introduction to the theory of internal control

Internal control environment

The essence of internal control-risk management

Internal control activities

Introduction to Internal Audit

Professional fraud

Establishment and implementation of internal control

SAO Act and Corporate Governance

Since 2012, the prelude to the comprehensive internal control audit of listed companies in China will be officially opened. In order to effectively pass the internal control audit, enterprises must first submit a self-evaluation report of qualified internal control. After more than a year of development, the internal control process review, risk identification and evaluation, and internal control system construction have become compulsory courses for the sustainable and stable development of the enterprise and the improvement of employees' competence. The internationally registered internal controller also immediately became a high-end talent urgently needed by major companies, showing a trend of oversupply. Enterprise managers need to better master the basic theory, regulatory requirements, practical operation skills, evaluation indicators and management methods required to engage in the construction of an enterprise's internal control system, thereby assisting the enterprise to improve the effectiveness of the internal control system. In order to adapt to the increasing demand for internal control talents, we are constantly sending talents to the field of internal control management.

In the context of borrowing and introducing foreign vocational qualification certificates, improving and developing the domestic vocational qualification certification examination system, in order to be invincible in the increasingly fierce corporate competition, management must choose professional and technical skills in the field of internal control Individuals who are able to rely on professionals who can rely on them. Obtaining the certification of internal controller of international registration shows that the certificate holder has mastered the general knowledge and skills of internal control and has professional competence in internal control. Internal control of international registration The professional knowledge system and certification standards of ICICS qualifications promoted by teachers worldwide. This qualification certification system establishes the requirements for the continuous improvement of the initial qualification standards and professional competencies of professionals in internal control worldwide.