COOPERATIVE DEVELOPMENT AUTHORITY

INTERNAL CONTROL
SEMINAR
 Learning Outcome
1 Define Internal Control and the roles and functions of the
Audit Committee.

2 Explain the Elements of an effective Internal Control

System.

Provide Internal Control Over Individual Accounts

3
 Learning Outcome No. 1

Define what is
Internal Control and
the roles and
functions of the
Audit Committee
 DEFINTION OF
INTERNAL CONTROL
 INTERNAL CONTROL defined…
• Comprises the plan of organization and all the
coordinate methods and measures adopted.

• Is the systems, policies, procedures and processes

effected by the BOD, management and other personnel

▪ to safeguard the cooperative’s assets

▪ check the accuracy and reliability of accounting system
▪ promote cooperative’s operational efficiency
▪ encourage adherence to prescribed managerial polices
▪ limit or control risk
▪ achieve the objectives of the entity
 INTERNAL CONTROL defined…
• A process, effected by cooperative’s board of
directors, management, and other personnel, designed
to provide reasonable assurance regarding the
achievement of objectives in the following
categories:

▪ Effectiveness and efficiency of operations

▪ Reliability of financial reporting
▪ Compliance with applicable laws and
regulations
 What is Audit
Committee?

COMPOSITION OF AUDIT ROLES AND FUNCTIONS

COMMITTEE

DUTIES AND RESPONSIBILITIES

The audit committee
is composed of at
least three persons
the chairperson the secretary

and a member
 Audit Committee
1 responsible for oversight of the financial reporting
process, selection of the Independent auditor, and
receipt of audit results both internal and external.

The committee assists the board of directors fulfil its

organization’s governance and overseeing responsibilities
2
in relation to an entity’s financial reporting, internal
control system, risk management system and internal and
external audit functions.
Roles and Function of
AUDIT COMMITTEE
Roles & Functions AUDIT COMMITTEE

• Monitor the adequacy and effectiveness of the cooperative’s

management and control system;

• Audit the performance of the cooperative and its various

responsibility centers;

• Review continuously and periodically the books of account

and other financial records to ensure that these are in
accordance with the cooperative principles and generally
accepted accounting procedures;
Roles & Functions AUDIT COMMITTEE

• Submit reports on the result of the internal audit and

recommend necessary changes on policies and other related
matters on operation to the Board of Directors and General
Assembly;

• Perform such other functions as may be in the By-laws or

authorized by the General Assembly.
 Learning Outcome No. 2

Explain the Elements

of an effective
Internal Control
System.
 WHY EXAMINE THE
INTERNAL CONTROLS?

As internal auditors, the Audit Committee would

want to check the coop’s controls for a numbers
of reasons;
• To gauge how adequate the controls are; internal controls are bases by
which the Committee can determine the security measures adopted
by the coop;
• To serve as proofs of strength or weakness in coop internal operations;
• To serve as guide in the selection of audit procedures and in specifying
the extent of audit work to be done; and
• To serve as a guide in the formulation of operational policies
PURPOSE of INTERNAL CONTROL
1. Ensure that the business of the Coop is conducted in a prudent
manner in accordance with policies and strategies established
by the board of directors
2. That transactions are only entered into with appropriate
authority

3. That assets are safeguarded and liabilities controlled

4. That accounting and other records provide complete accurate

and timely information
5. That management is able to identify, assess, manage and control
the risks of the business
THE FRAUD TRIANGLE

The fraud triangle is a framework designed to explain the

reasoning behind a worker’s decision to commit
workplace fraud. The three stages, categorized by the
effect on the individual, can be summarized as pressure,
opportunity and rationalization.
THE FRAUD TRIANGLE
• Step 1 – the pressure on the individual
Is the motivation behind the crime and can be either personal
financial pressure, such as debt problems, or workplace debt
problems, such as shortfall in revenue.

• Step 2 – the opportunity to commit fraud

Is the means by which the individual will defraud the organization. In
this stage the worker sees a clear course of action by which they can
abuse their position to solve the perceived unshareable financial
problem in a way that-again, perceived by them-is unlikely to be
discovered

• Step 3 – the ability rationalize the crime

The final stage in the fraud triangle. This is a cognitive stage and
requires the fraudster to be able to justify the crime in a way that is
acceptable to his/her internal moral compass
Situations that offer opportunity for
FRAUD
• Ineffective internal controls
• Too much trust placed on employees
• Employees have detailed knowledge of the
accounting system and its weakness
• Management domination can subvert(try to ruin
secretly) normal internal controls
• Expected moral behavior is not communicated to
employees (no code of ethics)
• Unreasonable budgets and expectations
• Related party transactions
• Incomplete or out of date procedural
documentation
• Management sets a bad example
• Conflicts of interest
Profile of FRAUDSTER
• Big spender (expensive hobbies, living
beyond means, high personal debt)
• Under stress (suffering from personal
crisis such as financial problems or bad
marriage)
• Has evident financial needs (illness,
drugs, gambling)
• Intelligent (challenged by a secured
system, bored by routines)
Profile of FRAUDSTER
• Inquisitive (tempted by the discovery of a
computer vulnerability)
• Risk taker (willing to bend the rules and
take chances)
• Rule breaker (takes short cuts, self-
justifies, infractions of law)
• Hard worker (first to arrive in the morning
and last to leave at night, never absent)
Reminders on FRAUD
• Internal auditors are not expected to be
fraud specialists

• Audit procedures, even if done with due

professional care, do not guarantee
fraud detection

• Detection of fraud is only a by-product of

the audit function, not its main goal
INTERNAL CONTROL
STANDARDS
 INTERNAL CONTROL Standards…
1) Signing Authorities
▪ The BODs shall approve signing authorities for the different levels
of officers to sign for and in behalf of the cooperative
▪ Extent of each level of authority shall be clearly defined.
(e.g. Lending, Investments, Disbursements, Supervisory Reports,
Contracts/Agreements, etc.)
 INTERNAL CONTROL Standards…
2) Management Structure
• The internal organization should provide for a management with clear accountability.

• Board of Directors should be able to have independent check on management, and

independent audit and compliance functions

• Should follow “four eyes” principle – segregation of various function, cross checking, dual
control of assets and double signatures

• Management shall have a regular review of the internal control procedures.

 INTERNAL CONTROL Standards…
3) Records for Compilation
• Records showing compliance with independent balancing procedures

• Statement of actual duties of persons assigned to handle cash and securities

• All internal control audit reports or their equivalent

• Information on equity shareholdings

• Information pertaining to the Electronic Data Processing (EDP) of the cooperative particularly on organization,
input controls, processing controls, output controls, software program and documentation standards.
 INTERNAL CONTROL Standards…
4) Handling of cooperative’s deposit account

• Opening and closing of deposit accounts shall be approved or authorized by the

designated officers
• Signature cards and deposit ledgers sheets shall be authenticated by a responsible
officer and accessible only to authorized person . Subsequent changes shall also
be validated.
• Cancelled Checks issued should be stamped cancelled or perforated.
• Reports on closed accounts and returned checks shall be prepared daily.
 INTERNAL CONTROL Standards…
5) Handling of member-deposit account
• All new deposit accounts shall be approved or authorized by the designated officer.

• Signature card or deposit ledger sheets shall be authenticated by a responsible officer.

• Signature card or deposit ledger sheets shall be accessible to authorized person only

• A system to identify member-depositors shall be established

• Reports closed accounts of members shall be prepared on a monthly basis.

 INTERNAL CONTROL Standards…
6) Handling of dormant/inactive accounts
(no activity-deposits or withdrawals for a certain period as stated on the policy)

• The cooperative shall review and segregate dormant/inactive account at least once every
semester.

• Exert effort to prevent dormancy of accounts. Send letter to a depositor encouraging him to
use his account

• Dormant accounts shall be segregated from active files. Segregated dormant accounts
including signature cards and deposit ledgers shall be placed under joint custody of 2
responsible officers/employees of coop.
 INTERNAL CONTROL Standards…

6) Handling of dormant/inactive accounts

(no activity-deposits or withdrawals for a certain period as stated on the policy)

• A schedule of dormant/inactive account shall be prepared

• An entry to dormant/inactive account ledgers shall be verified and initialed

by a designated officer

• All inquiries on dormant accounts shall be coursed to one officer who should obtain
sufficient identification from the inquirer to ensure that he is entitled to that information
 INTERNAL CONTROL Standards…
6) Handling of dormant/inactive accounts
(no activity-deposits or withdrawals for a certain period as stated on the policy)

• A subsidiary ledger control for individual dormant/inactive accounts shall be

maintained periodically by an employee other than the bookkeeper and shall tally
the same with the general control.
• All transactions affecting dormant/inactive accounts shall be subject to audit by
the internal auditor.

• A semestral report on deposit accounts transferred to dormant shall be rendered

to management and to the board
 INTERNAL CONTROL Standards…

6) Handling of dormant/inactive accounts

(no activity-deposits or withdrawals for a certain period as stated on the policy)

• Reactivation of dormant accounts shall be in accordance with the policies

and procedures.

• A cooperative may impose service charges on and deduct the same from
dormant/inactive accounts.
 INTERNAL CONTROL Standards…
7) Proper accounting records

• The coop shall adopt the operationalization of the coops accounting and
bookkeeping syatem under CDA MC-2015-06 (PFRF) and CDA MC-2016-06
(Revised SCA)
• Cooperative shall maintain up-to-date and adequate accounting records . It shall
contain sufficient detail so that an audit trail is established.
• Prior to approval, all vouchers shall bear the initials of both the person authorized to
prepare and another parson authorized to check.
 INTERNAL CONTROL Standards…
8) Independent Balancing
▪ Records posted by a person or cash held by a teller or cashier shall be balanced or counted
by another person
Example:
Monthly reconciliation of general ledger balanced against subsidiary ledgers and supporting
records by someone other than bookkeeper or person handling the record

Irregular and unannounced cash count and checks at least twice a month by the auditor or
officer not connected with cash department
 INTERNAL CONTROL Standards…
8) Independent Balancing
• Presence of incumbent tellers/cashiers during actual cash count by any authorized person
or during examination by the Authority;
• Monthly reconciliation of due from banks, cash in bank accounts and due from/to head
office/branches by someone other than the person handling the records or posting the
general ledger entries;
• At least quarterly verification of securities and collaterals by a person other than their
custodian
• Periodic verification of the accuracy of the interest credits to deposit liabilities accounts.
 INTERNAL CONTROL Standards…
9) Division of Duties and Responsibilities

• The duties of all the officers and employees shall be segregated , clearly defined and
documented in the Manual of operations.

• No individual shall have complete authority and responsibility for handling all phases of any
transaction from beginning to end without checks and balances from other parts of the
organization

• The physical handling of a transaction shall be separated from its recording and supervision
 INTERNAL CONTROL Standards…
10)Rotation of Duties
• Rotation reduces the opportunity for fraud points to the adaptability of an employee
and often results in new ideas for the organization
• The full time personnel handling cash, securities, loan accounts and bookkeeping
records shall be rotated.

But..
The personnel handling treasury functions shall not be rotated to positions handling
accounting functions and vise versa
 INTERNAL CONTROL Standards…
10)Rotation of Duties

• Rotation shall be at random , unannounced and long enough to permit

disclosure of any irregularities of manipulations

• Prior to rotation proper, turn-over of cash accountabilities and records shall

have been made.
 INTERNAL CONTROL Standards…
11)Joint Custody
• The requirement of the presence of and direct observation of a second person in the
performance of important tasks and functions

• Both persons shall be equally accountable for the physical protection of the items and
records involved.

• Persons who are related to each other within the 3rd degree of consanguinity or affinity
shall not be made joint custodians.
 INTERNAL CONTROL Standards…
12) Handling of Cash and Vital Documents
• Cash in vault and in ATM cash dispensers
• All accountable forms
• Collaterals
• Securities
• Documents of title and/or ownership of properties or fixed assets
• Dormant or inactive deposit ledgers/MIS print-outs and corresponding signature
cards including on-line posting of dormant/inactive accounts
 INTERNAL CONTROL Standards…
12) Handling of Cash and Vital Documents
• Collection items
• Vault door and safe combinations
• Unissued specimen signature books
• Unissued and captured ATM cards and similar devices
• Access locks and keys to on-line MIS terminals and similar devices
• Access locks and keys to MIS mainframes and peripherals.
 INTERNAL CONTROL Standards…
13) Dual Control

• The work of one person shall be verified by a second person to ensure that
the transaction is properly authorized, recorded and settled.

• The routine and completion of each transaction shall involve at least two (2)
duly authorized individuals.
 INTERNAL CONTROL Standards…
13) Dual Control

Accounts/transactions which shall be under dual control

• Checks - The signature of at least two (2) officers should be required in the
issuance of checks
• Certificates of Time Deposit-The board of directors of a cooperative
• Is given the discretion to determine the number of signatories for the issuance of the
Certificates of Time Deposit (CTD)
 INTERNAL CONTROL Standards…

14) Number Control

• Sequence number control shall be incorporated in the accounting system and shall
be used in registering promissory notes, issuing official checks, forms, etc..
• Purpose:
– To control processing
– To identify individual transactions
 INTERNAL CONTROL Standards…
14) Number Control
• Forms, instruments and accounts that shall be under controlled:
- Promissory Notes
- Savings Deposit Accounts and Passbooks
- CTD’s
- Signature Cards
- Official and Provisional Receipts
- Share Certificates
- Loan Accounts
- Expense and Loan Vouchers
- MIS batch transmittal slips of documents
 INTERNAL CONTROL Standards…
15) Confirmation/Verification of Accounts

• At least once a year, the internal auditing staff shall confirm by direct
verification with cooperative members and clients the following:
▪ Balance of loans and credit accommodations
▪ Deposit account balances(active and dormant)
▪ Balances of Borrowings and other liabilities
▪ Balances of receivables and payables
 INTERNAL CONTROL Standards…
16) Records Preservation System
• The cooperative shall be required to establish a record preservation system
for the off-site storage of duplicate vital records center which can be used
for reconstruction purposes in the event of catastrophe.

• The vital record center is defined as any location to avoid the simultaneous
loss of both sets of records in the event of disaster.
 INTERNAL CONTROL Standards…

17) Security Program

Each cooperative shall be required to institute a written security to protect
the cooperative office from robberies, burglaries, larcenies and embezzlements;
to prevent destruction of vital records as defined herein and to assist in the
identification of persons who commit such crimes.
Help..

Internal Control Over

Individual Accounts

48
 CASH
1. Cash in vault is under dual control

2. Receipts are acknowledged with pre-

numbered official receipts

3. Cashiers/Tellers are
located in cages

4. All payments are

authorized and
approved 49
5. All disbursements, except from petty cash fund,
are made by check

6. Expense checks and support papers are

reviewed and approved for payment by a
responsible officer

7. Supporting documents are stamped “PAID” and

noted with the check number and date of
payment
8. Voided or spoiled checks are properly mutilated
and held available for subsequent inspection

50
9. Unused checks are properly controlled

10. The signing or countersigning of checks in

advance or in blank is prohibited

11. The drawing of checks to “CASH” or

“BEARER” is discouraged

12. Bank reconciliation should be prepared

monthly

13. All cash transactions should be recorded

promptly
51
LOANS
1. All loans granted, renewed or
extended are covered by loan
My Loan
was approval memos
Granted

2. Loan officers have definite loan

limits established by the Board of
Directors

3. A list of loans granted or renewed is

submitted periodically to the Board of
Directors

52
4. All collaterals are evaluated
by a Credit Department

5. A number control is maintained

and a number is assigned to
every new loan or renewal

6. Signatures on renewals are

compared with the
signatures on file

53
 7. Payments on loans are made directly to the Cashier
or Teller and not through the officer granting the loan
or employees handling the loan records

8. Appropriate follow-up to
collect delinquent accounts
are being made

9. Lists of past-due notes are

submitted regularly to the
management and the Board of
Directors 54
10. All accounts written off
are approved by the
Board of Directors

11. The individual ledger card is properly kept and

updated

12. Interest income from loans are properly accounted

for

55
 Advances to Employees

1. Advances to employees should be authorized in

writing by a responsible independent official.

2. Failure of officers or employees to adhere to

repayment terms of advances should be brought to
the attention of management.

56
 Accounts Receivable

1. Proper segregation of the following function:

a. Credit and Collection
b. Cashier
c. Sales
d. Accounting

2. Adequate records should be kept

3. Accounts receivable bookkeeper is independent of collections

and disbursements
4. Subsidiary ledgers should be kept for all customers
5. Monthly statements should be sent to all customers

57
6. Limitations should be placed on the credit to be extended to
each individual member/customer

7. The sales department should be immediately notified once a

member has reached its limits

8. Accounts be aged periodically and delinquent accounts

reviewed by a proper official

9. Bad debt write offs are approved in writing by a responsible

officer

10. Credit adjustment should be approved in writing by a responsible

independent official

11. Disputed items should be handled by an officer other than the

cashier, credit manager or receivable bookkeeper

58
INVENTORIES

1. To the extent justified by the cost, perpetual inventory should be

maintained
2. Inventory records should be kept by persons who are
independent of the storekeeper
3. All goods should be delivered directly to the storekeeper

4. The receiving function should be separate from purchasing or

accounting
5. Goods received should be verified for quantity and formal
receiving reports prepared and distributed to:

a. Accounting department
b. Purchasing department
c. Receiving department

59
6. Inventory should be stored in a locked storeroom under the
supervision of a custodian

7. Deliveries from the storeroom should be made upon requisition only

8. Inventory should be verified by physical count at least quarterly

9. Physical counts should be taken by persons independent of the

storekeeper and those responsible for maintaining the perpetual
inventory records

10. Stock should be properly identified and arranged before the count
to insure accurate identification and counting

11. There should be proper cut-off inventory receipts and issuances

12. Inventory count tags, sheets, etc. should be properly controlled

60
13. The critical work in taking the inventory should be independently
verified

14. Discrepancies between perpetual inventory records and the physical

count should be investigated and accounted for

15. Special accounting control should be exercised over consignments

out, goods in warehouses, returnable containers, and materials with
suppliers

16. Merchandise on hand which is not the property of the coop such as
consignments, should be physically segregated if necessary and kept
under appropriate accounting and physical control

17. Obsolete, damaged, slow-moving and excessive items of inventory

should be reported periodically to a responsible person

18. Inventory should be adequately insured. Insurance coverage should

be reviewed periodically

61
INVESTMENT

1. Purchases and sales of investments

are properly authorized

2. If investments are pledged as

collateral, the pledges are authorized

3. The custodians are prohibited from

entering into transactions involving
securities and other investments

4. All income from securities/ investments

are properly accounted for
62
 PROPERTY AND EQUIPMENT

1. Subsidiary ledger cards are maintained for fixed asset

2. These cards are periodically reconciled with the controlling

accounts balance

3. A physical inventory of fixed assets is taken at least

annually and the results are compared with the
subsidiary and control records

4. Individual fixed assets are tagged or otherwise identified

and related to the subsidiary records

63
5. The Coop should have a well – defined policy governing
the differentiation between Capital and Revenue
expenditures

6. Fully depreciated assets still in use

are included in the asset accounts

7. Prior written approval is required for additions to fixed

assets, sale of fixed assets, scrapping or retiring fixed
assets, transfer of fixed assets from one department or
branch to another, and adjustments of book record to
physical inventory 64
Savings Accounts

I will add
1. All new savings accounts are
this to my approved by a designated officer
Saving
Account

2. Signature cards for all accounts

are on file and are adequately
controlled

3. Tellers/ Cashiers verify deposit slips

against items received for deposit
before validating deposit slips.

65
4. Signature on withdrawal slips are verified by a clerk
against signature cards on file

5. All savings withdrawals are approved by a designated

officer
6. Interest credited to depositors’ ledger is checked by an
employee other than the one who made the computation

7. Inactive or dormant accounts are properly controlled

8. Individual savings account balances are periodically

reconciled against controlling account balance

9. Erasures on ledgers are not permitted

66
Time Deposit
1. Issuance of all time certificates of
deposit are properly approved

2. Depositors’ signature cards are

adequately controlled

3. Proper resolutions or letters of

authorization are on file for
accounts of the cooperatives and
organizations

67
4. Time certificates of deposit
are pre-numbered and
issued in numerical
sequence

5. Depositors are required to

acknowledge receipt of
certificates

6. Subsidiary ledgers are

maintained for each
certificate of time deposit
outstanding
68
 7. Outstanding time deposits per subsidiary ledgers
are periodically proven against the control
account

8. Signature of depositors is verified

against cards on file before any
withdrawal is honored

9. Certificates of deposits withdrawn are

endorsed by the depositor and surrendered to
the cooperative
69
 10. Originals of paid or cancelled
certificates are perforated or
otherwise marked with the date
of payment

11. Interest accruals are properly

taken in the records

12. Computation of interest is

rechecked before payment
is made to the depositor

70
 Loans Payable
1. Authority for borrowings with financing
institutions and other cooperatives are
authorized by the BOD.
2. Loans payable and other
borrowings are recorded in
subsidiary ledgers or equivalent
record which shows the amount,
maturity date, interest date,
payment of principal, payment of
interest and collaterals, if any

3. The subsidiary records are properly

reconciled with the controlling account

71
4. The terms an conditions of the
liability agreement are complied
with

5. Interest payments are properly

controlled and reconciled with
the rates and amounts
specified in the agreement

6. Paid instruments are cancelled

and filed.

72
Share 1. Unissued/unused share capital
Capital certificates stubs are under the
custody of an officer
2. Surrendered Capital certificates
are duly cancelled
3. Withdrawals of share capital are
duly approved by the Board of
Directors
4. Subsidiary records are reconciled
with control accounts
5. Proper control is exercised to assure
that individual dividend payments are
made out in correct amounts payable to
the correct parties 73
Sales and other
Revenues

74
A. Member’s order’s

1. Members’ order should be consecutively pre-

numbered and properly controlled

2. Member’s orders should be approved by the

sales department

3. Member’s orders should be correlated with

the sales invoices

75
 B. Delivery of Goods

4. Members should be asked to sign delivery

receipts which should be kept on file

5. Delivery receipts should be pre-numbered and

all numbers accounted for

6. Shipments should be authorized by a

responsible official
76
7. The sales invoice, delivery receipt and inventory
requisition should be prepared simultaneously

8. Sales invoices should be prepared by employees

not having anything to do with delivering or shipping
goods, with the accounts receivable subsidiary ledgers
or with cash

9. Voided sales invoices should be retained

77
10. Invoices should be checked for prices, footings and
extensions, credits terms, quantities billed and shipped
by a person independent of the custody of the goods,
cash or the accounts receivable subsidiary ledgers

11. Receiving reports should be prepared for all returned

goods

12. Returns should be recorded promptly in the inventory

records and in the members’ subsidiary ledger’s

78
13. Receiving reports should be matched with the
credit memoranda

14. Credit memoranda should be pre-numbered,

authorized by a responsible official and properly
controlled

15. Sales returns should be analyzed, their causes

investigated and the results reported to a
responsible official

79
C. Other Control Measures

16. Sales to employees

should be properly
controlled

17. There should be adequate

control over income from
scrap sales, interest,
dividends, and sales of
fixed assets

80
Purchases and Expenses

81
A. Purchases and Expenses Orders

1. There should be an organized purchasing unit

which should be independent from receiving,
shipping, custody of goods and accounting

2. Expenses should be properly authorized

3. Purchases should be made only upon formal,
written requisitions from department heads

4. Purchase orders should be executed in

writing on official pre-numbered purchase
order forms 82
5. Purchases should be properly approved for
price, quantify and supplier

6. Purchases should be made only from an

approved list of suppliers

7. Prices should be checked periodically

8. A copy of the purchase order should be

sent to the accounting department to be
matched with the suppliers’ invoice and
receiving report
83
B. Receipts of Goods

9. Receipt of goods should be

controlled. Quantify and condition
should be checked

10. A copy of the receiving report should

be sent to the accounting department

84
C. Other Control Measures

11. suppliers’ invoices should

be checked against
purchase orders and
receiving reports

12. Invoices should be checked

as to prices, freight charges,
extensions and footings

85
PAYROLL

86
1. Employment should be properly authorized to
ensure that payments are made only to bonifide
employees
2. Separation should be immediately reported to the
payroll section

3. Pay increases should be formally authorized

4. Personnel department independent of the payroll

section should keep employment records

5. Employees should be required to prepare DTR

which should be installed
87
6. When warranted by the number of personnel, time
clocks should be installed

7. Payroll should be prepared by persons who have

nothing to do with hiring employees, authorizing
rates of pay, and time-keeping

8. Payroll should be signed by a responsible official

9. Payees should be identified by personnel

recognition or some other means to avoid paying to
the wrong person
10. Employees should be asked to sign receipts or the
payroll sheets as evidence of payment
88
Weak Internal Controls Increase Risk Through…
Business Interruption Erroneous Management Decisions
01 - system breakdowns or catastrophes,
02 based on erroneous, inadequate or
excessive re-work to correct for
errors. misleading information.

- Fraud, Embezzlement and Theft Statutory Sanctions

- by management, employees,
03 customers, vendors, or the public-at- 04
- penalties arising from failure to comply
large.
with regulatory requirements, as well as
overt violations.

Excessive Costs/Deficient Revenues

Loss, Misuse or Destruction of Assets
05 - expenses which could have been
avoided, as well as loss of revenues to 06 -unintentional loss of physical assets
which the organization is entitled. such as cash, inventory, and
. equipment.
Benefits from Strong Internal Controls
1 Reducing and preventing errors in a cost- effective manner.

2 Ensuring priority issues are identified and addressed.

3 Protecting employees & resources.

Providing appropriate checks and balances.

4
Having more efficient audits, resulting in shorter
5 timelines, less testing, and fewer demands on staff.
 Effective INTERNAL CONTROLS…

01 Make sense within 02 Benefit rather than

each organization’s
encumber
unique operating
management.
environment.

Are not stand-alone

practices; they are
03 woven into day-to- 04 Are cost-effective.
day responsibilities.