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An Approach In Design
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An effective way of in design of internal control is to divide the process into phases
and to analyse these phases one by one.
In the analysis one scrutinizes what is doing right things in each phase,
and what is needed to ensure that these things are done in terms of
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| - | achievement of objectives and exploitation of opportunities; |
| - | respect of rules; and |
| - | obtaining adequate [control] information. |
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During this exercise the control objectives of the phases are identified.
First, the main control objective is identified. Detailed control objectives are derived from it.
The next job is to imagine how to achieve the detailed control objectives.
The answer is in the internal control elements:
one needs to determine the appropriate content for them.
The control elements of the ECAR model relevant in building the process are
[control] environment, controls, and accounting systems.
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However, examining separately the phases of process is not enough.
The process as a whole must be examined as well.
Attention must be paid to the elements of internal control on the process level.
Elements to be considered include e.g. expected behaviour of the employees ([control] environment),
segregation of duties (controls) and confidentiality,
integrity and availability of [control] information (accounting systems).
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Miscellaneous Tips
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In addition there are some other common tips that might be helpful in designing internal control.
The following tips are indicative; they are not in an order of preference.
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| 1) |
Right designers.
Have the process built by a carefully selected team
- with expertise, questioning, and creativity
– and make use of the expertise and experience of internal and external auditors.
A qualified team is important because of the long list of factors to be considered:
the process's purpose in the organization, phases, inputs, outputs,
environment, direction, resources, risks - and demands of rules.
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| 2) |
Continuous uphold and development of [control] environment.
Behave yourself in a manner that upholds [control] environment.
Let the building of internal control never stop.
Make the staff understand the inevitability of controls, accounting systems, and determination of risks.
Keep them oriented to think how to develop the efficiency of processes, including their internal control.
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| 3) |
Cost-effectiveness.
Pay attention to factors and circumstances (matters)
on which attainment of basic objectives of a process depends most.
Respectively, give priority to internal control that is most effective and efficient in affecting the matters.
Normally marginal benefit decreases control by control:
every new control helps less and less in achievement of control objectives
while it increases costs and harms.
However, heavy control costs should be accepted, too, when law and regulations require controls.
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| 4) |
Common simple and cheap solutions.
Have a system of objectives (expectations) in place:
as a direction to go any objective makes it harder to do things not meant to.
Make full use of existing control features of the accounting systems.
Establish both communication channels for control failures and forums for discussing about control concerns.
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| 5) |
Think twice.
Adding controls and new features later to accounting systems and
changing organizational behaviour are usually difficult and expensive;
so think of consequences.
Take seriously any doubt concerning effectiveness, efficiency and lack of controls.
Ineffectiveness and inefficiency of controls can be excuses for not performing them properly.
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