Internal controls

In accounting and organizational theory, internal control or internal control is defined as a process, which is influenced by human resources and information technology systems, which are designed to help organizations achieve a particular goal or objective. Internal control is a way to direct, supervise, and measuring an organization's resources. He played an important role to prevent and detect fraud (fraud) and protect the organization's resources both tangible (such as machinery and land) or not (such as reputation or intellectual property rights such as trademarks).
The existence of an adequate accounting system, making the company accountant to provide financial information for every level of management, the owners or shareholders, creditors and users of financial statements (stakeholders) who form the basis of economic decision making. The system can be used by management to plan and control company operations. For more details, policies and procedures to be used directly intended to achieve goals and guarantee or provide an appropriate financial reports and ensure ditaatinya or compliance with laws and regulations, it is called Internal Control, in other words that consists of internal control policies and procedures used in company operations to provide reliable financial information and ensure compliance with laws and regulations.
At the organizational level, internal control objectives associated with the reliability of financial reporting, feedback on time to the achievement of operational objectives and strategic, and compliance with laws and regulations. At the level of specific transactions, internal control refers to actions undertaken to achieve a particular goal (eg to ensure payment to a third party carried out on a service actually performed). Pengedalian internal procedures and processes to reduce variation in turn provide better results can be expected. Internal control is a key element in the Foreign Corrupt Practices Act (FCPA) in 1977 and the Sarbanes-Oxley Act of 2002 which requires an increase in the internal controls of public companies the United States.

Objectives of internal control
Internal control objectives is to ensure that corporate management:
• The company's goal set will be achieved.
• The financial statements produced by the company can be trusted.
• the company activities in accordance with the laws and regulations.
Internal controls can prevent the loss or waste of corporate resources processing. Internal controls can provide information about how to assess corporate performance and corporate management as well as providing information that will be used as a guide in planning.
Elements of Internal Control
Committee of Sponsoring Organizations of the Treatway Commission (COSO) introduced the five components of internal control which includes Environmental Control (Control Environment), Risk Assessment (Risk Assessment), Procedure Control (Control Procedures), Monitoring (Monitoring), as well as Information and Communication ( Information and Communication).
Environmental Control (Control Environment)
Environmental control of the company include the attitude of the management and employees on the importance of control in the organization. One of the factors that influence the control environment is the management philosophy (in a single management partnership or joint management within the company) and the operating style of management (management of progressive or conservative), organizational structure (centralized or decentralized too) and kepersonaliaan practice. Environmental control is very important because the basic elements of the effectiveness of internal control others.
Risk Assessment (Risk Assessment)
All organizations have a risk, in any condition that his name must be in the risk of an activity, whether activity related to the business (profit and non-profit) and non-business. A risk that can be identified in the analysis and evaluation in order to predict the intensity and action that can minimize them.
[edit] Procedure Control (Control Procedures)
Control procedures established to standardize the work processes in order to ensure the achievement of corporate objectives and to prevent or detect the occurrence of irregularities and errors. Control procedures include the following:
• competent personnel, transfer of duties and mandatory leave.
• Delegation of responsibility.
• Separation of responsibility for related activities.
• The separation of accounting functions, storage and operational assets.
Monitoring (Monitoring)
Monitoring of internal control systems will find deficiencies and improve the effectiveness of control. Internal controls can be monitored well by way of a special assessment or in line with management efforts. The last monitoring efforts can be done by observing the behavior of employees or the warning signs given by the accounting system.
Special assessment is usually done on a regular basis during the main changes in senior management strategy, corporate structure or business activity. In large companies, internal auditors are responsible for monitoring internal control systems. Independent auditors often make an assessment of internal controls as part of the audit of financial statements.
Information and Communication (Information and Communication)
Information and communication elements are important from my company's internal control. Information about the control environment, risk assessment, control and monitoring procedures required by Winnebago management operational guidelines and ensures compliance with reporting laws and regulations that apply to the company.
Information is also needed from outside the company. Management can use this type of information to assess the external standard. Law, events and conditions that affect the decision-making and external reporting.
[edit] References
• International Organization of Supreme Audit Institutions (INTOSAI): Guidelines for internal control standards (1992)
• Committee of Sponsoring Organizations of the Treadway Commission: Internal control - integrated framework (1994)
• Sugiarto, Introduction to Accounting, Open University Publishing Center, Jakarta, 2002.