Who Cares about Internal Control?
- Investors
- External auditors
- legislative and regulatory bodies
- Limit and direct employees’ authority and discretion
- Customers
Internal Control Definition 内部統制の定義
COSOによる定義
Internal control is a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.
Internal Control – Integrated Framework copyright 1992, 1994, and 2013 by the Committee of Sponsoring Organizations of the Treadway Commission
- Operations objectives relate to the effectiveness and efficiency of operations.
- Reporting objectives pertain to internal and external financial and non-financial reporting.
- Compliance objectives relate to the organization’s compliance with applicable laws and regulations.
Fundamental Concepts 基本コンセプト
- The purpose of internal control is to help the company achieve its objectives.
- Operations
- Reporting
- Compliance
- Internal control is an ongoing process.
- Internal control is effected by people.
- Internal control procedures can provide reasonable assurance only – not absolute assurance and not a guarantee.
- reasonable assurance 合理的保証 ⇔ absolute assurance 絶対的な保証
- Internal control must be flexible.
How internal control provide reasonable assurance?
- Segregation of duties
- assigning different employees to perform function
- Reconciliation of recorded accountability with assets
- Safeguarding controls
- limit access to an organization’s assets to authorized personnel.
Internal control objectives
- Operations objectives
- Operations should be as efficient as possible; the company’s resources should be used effectively and efficiently. Assets should be safeguarded against loss.
- Reporting objectives
- Internal and external financial and nonfinancial reporting objectives include reliability, timeliness, transparency, and other requirements of regulators, standard setters, or the entity’s policies.
- Compliance objectives
- Care should be taken to follow and be in compliance with all applicable laws and regulations to which the company is subject.
Responsible for Internal Control
- The board of directors is responsible for overseeing the internal control system.
- The CEO is ultimately responsible for the internal control system and the “tone at the top”.
- Senior managers delegate responsibility for establishment of specific internal control policies and procedures to personnel.
- Financial officers and their staffs are central to the exercise of control.
- Internal auditors pay a monitoring role.
- All employees are involved in internal control.
- External parties provide information that is useful to effective internal control.
Transaction Control Objectives
- Authorization
- Completeness
- Accuracy
- Validity
- Physical safeguards and security
- Error handling
- Segregation of duties
Types of Transaction Control Activities
- Authorization and approvals
- Verifications
- Physical controls
- Controls over standing data
- Reconciliations
- Supervisory controls
Safeguarding Controls
- Segregation of duties
- Physical protection and controlled access to records and documents
- Physical protection measures to restrict access to assets
- Effective supervision and independent checks and verification
Segregation of Duties
以下の4つの業務は必ず別人が担当すること!
- Authorizing a transaction.
- Recordkeeping: Recording the transaction.
- Keeping physical custody.
- The periodic reconciliation.
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