√ Complete Definition of Internal Control System, Objectives & Elements
Complete Definition of Internal Control System, Purpose & Elements – In this discussion we will explain the internal control system. Which includes the definition of the internal control system, the purpose of the internal control system and the elements of the internal control system with a complete and easy-to-understand discussion.
Complete Definition of Internal Control System, Purpose & Elements
For more details, please see the review below carefully.
Definition of Internal Control System
Internal control system or also called internal control is a process that is influenced by resources human and information technology systems, which are made in assisting organizations in achieving a goal or objective certain.
Internal control is a way of directing, supervising, and measuring the resources of an organization or company. This system has an important role in preventing and detecting fraud and protecting good organizational resources tangible (such as machinery and land) or intangible (such as reputation or intellectual property rights such as brands trade).
The internal control system includes the organizational structure, methods and measures that are coordinated in maintaining organizational assets, checking the accuracy and reliability of accounting data, giving a boost in efficiency to comply with policies management.
This control has a narrow or broad meaning, in this case the narrow meaning of internal control "internal check" is a system and procedures that can automatically check each other.
In the sense that the accounting power obtained by a part or function can automatically be checked by another part or function in an effort. While the broad meaning of AICPA carries out the notion of internal control as follows:
Internal control includes the organizational structure and all coordinated methods and tools used within the company that aim to maintain the security of property. company, check the accuracy and correctness of accounting data, promote efficiency in operations and help maintain, comply with management policies that have been determined in advance formerly.
Internal control is a process regulated by the board of commissioners, management and other business unit personnel designed to gain confidence adequate to the achievement of objectives in the following respects: reliability of financial reports, compliance with applicable laws and regulations, effectiveness and efficiency operation.
Internal Control System According to Experts
In this case the meaning of the internal control system according to Mulyadi includes the organizational structure, methods and measures coordinated to maintain organizational wealth, check the accuracy and reliability of accounting data, encourage efficiency and encourage compliance with policies management.
Meanwhile according to Romney and Steinbart (2003) the meaning of internal control is "internal control is the plan of organizations and the method of business use to safeguard assets, provide accurate and reliable information, promote and improve operational efficiency and encourage adherence to prescribe managerial policies”.
Internal Control System Objectives
There are objectives of the internal control system, among others:
- Maintain organizational wealth
- Carry out checks on the accuracy and reliability of accounting data
- Provides operational efficiency boost
- Provide compliance with management policies.
Based on its purpose, the internal control system is divided into two types, namely:
- Accounting internal control includes the organizational structure, methods and measures that are coordinated primarily to safeguard the company's assets and to check the reliability of accounting data.
- Administrative internal control includes the organizational structure, methods and coordinated measures primarily as a driving force for compliance with management policies.
Elements of the Internal Control System
To carry out an internal control system in achieving the main objectives of a company's internal control system is composed of the following elements:
A structure that separates functional responsibilities explicitly. The organizational structure is a "framework" framework for the distribution of functional responsibilities to organizational units created to carry out the company's core activities. The division of functional responsibilities in this organization is based on the following principles:
- It is mandatory to separate operating functions and deviation from the accounting function
- A function cannot be given full responsibility for carrying out all stages of a transaction.
Systems of authority and record keeping procedures that provide adequate protection of property, money, income and expenses. Within the organization, each fee transaction only occurs on the basis of authorization from an official who has the authority to approve the transaction.
Therefore, within the organization, it is mandatory to create a system that regulates the distribution of authority for authorization for the implementation of each transaction.
Healthy practices in carrying out the duties and functions of each organizational unit, division of authority for functional responsibilities and systems of authority and procedures recording that has been determined will not be carried out properly if there are no ways to ensure healthy practices in carrying it out. The following are ways that can be used by companies in carrying out healthy practices, including:
- The use of printed serial numbered forms whose use must be accounted for by the authorities.
- Examine sudden "surprised audit" with an irregular schedule
- Each transaction is not carried out from start to finish by one person or one organizational unit, without any interference from another person or organizational unit.
- Rotation of positions "job description" which is carried out routinely which will prevent officials from colluding in carrying out their duties.
- Obligation to take leave for eligible employees.
- Regularly perform physical matching of assets with records to safeguard the organization's assets and to check the accuracy and reliability of accounting records.
- Establish an organizational unit that functions to check the effectiveness of other elements of the internal control system.
Employees who need according to their responsibilities. To obtain competent and trustworthy employees, there are several ways that must be taken by the company, namely:
- Selecting prospective employees according to the requirements demanded by the job.
- Develop dive employee education to become company employees, in accordance with the demands of job development.
Thus has been explained about Complete Definition of Internal Control System, Purpose & Elements, hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.
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