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INTOSAI Guidelines On Int. Controls
INTOSAI Guidelines On Int. Controls
INTOSAI Guidelines On Int. Controls
Internal Controls
RTI, Jaipur
Internal Controls- Definition
“Internal control is an integral process i.e. a series of
actions that permeates all activities that is effected by
management & personnel & designed to address risks &
to provide reasonable assurance that in the pursuit of the
entity’s mission, the following general objectives are
being achieved:
Promoting orderly, economical, efficient & effective
operations, quality products/services consistent with the
organization's mission.
Safeguarding against loss, waste, abuse, mismanagement,
errors, fraud and irregularities.
Adhering to laws/regulations/management directives.
Appraising the relevance, reliability and integrity of
management, financial & operational data/ reports.”
Internal Controls- Objectives
• Executing orderly, ethical, economical, efficient & effective
operations.
• Fulfilling accountability obligations.
• Complying with applicable laws and regulations.
• Safeguarding resources against loss, misuse and damage.
Preventive
Control Types
Detective
Preventive Controls
E.g. include:
Reconciliations.
Performance reviews.
Physical verification of inventories.
Audits.
Reliance on Controls
Reasonable assurance depends on the results of audit testing of
the Unit’s control systems.
Internal auditors must assess the adequacy of internals controls
and suggesting appropriate recommendations.
They must identify the Unit’s significant controls & then decide
the appropriate audit testing procedures.
To this end:
Establish the audit objectives and identify the key areas/issues
to be examined.
Identify for testing the key controls in the areas above.
Conduct audit tests and assess the appropriateness, sufficiency
and reliability of the controls being tested.
Evaluate whether the controls are actually effective, its extent
or otherwise.
Document the steps taken and the testing procedures applied,
collect evidence, arrive at relevant audit opinion and proceed to
the reporting stage.
IC Elements
Control Environment
Risk Assessment
Control Activities
IC Elements
Information &
Communication
Monitoring
IC Elements- Control Environment
Organizational
Structure
Delegation of Duties
Management’s Control
Consciousness
Control
Ethical Behaviour &
Environment Integrity
Competence of Staff
Management’s
Philosophy & Operating
Style
Unit’s Operating
Environment
Control Environment
Foundation for all other elements of internal control &
provides it with an appropriate structure and
discipline.
Control environment established by Unit’s
Management must encourage a positive and supportive
attitude toward internal control.
The nature and intensity of the control environment
will define the Unit Management’s commitment to its
internal controls & influence the control consciousness
of its people.
Heads of each functional sections, area or activity
must thereafter establish a local control environment
relevant for their activity.
The key factors that affect a Unit’s control
environment include:
Organizational Structure & Delegation of
Duties
Organizational structure provides the overall
framework for its effective functioning.
It must ensure that the method of assigning authority
and responsibility are clearly defined.
Reporting relationships are well understood and it
encourages the achievement of the Unit’s objectives.
The strength & appropriateness of a Unit’s
organizational structure can be evaluated by asking the
following questions:
Management’s Control Consciousness
Are actions based on the Unit’s Rules and Regulations, Codes and
Manuals, Operating Procedures etc which enable enforcement of
Management’s directives.
Occur at all Unit levels/functions, facilitate standardized
procedures/ risk mitigating measures & enhance the Unit’s
accountability framework.
IC procedures must be flexible and suitable to its IC objectives
& hence will vary from Unit to Unit & even within the same Unit
depending upon the size/ complexity/activity/operational
requirements & Management’s risk perception.
Examples include authorization procedures, physical restrictions,
documentation etc.
Information and Communication
Reliable, relevant & timely information enables
appropriate & timely action to be taken. An efficient
system of information capturing and sharing enhances
accountability and better achievement of objectives.
Unit’s communications system must facilitate
information flow & record all relevant information in a
reliable, timely & accurate manner.
Unit Management must ensure that there are
adequate means of information and communication
sharing with its external stake holders.
Through effective communication, every officer must
be made aware of their roles and responsibilities
towards control functions and how each of their
activities relates to the overall control activities.
The following are some of the questions that enable
evaluation of the quality of the Unit’s information and
communication system:
Information & Communication- Assessment