The Vitality To Business Growth And Success
The risk business organization is exposed to, without internal check. The reasons why this managerial function helps in getting things done and the importance of segregation of duties.
Internal Control The Strength to Business Success
Every business organization set up mission statement and vision statement which stands as guide to their co-operate existence. The strength of a solid business organization lies in its internal control, which means its plays a vital role in the life of a business organization. A weak internal control has a great negative effect on business organization that does not check it. The management in charge of business organization must ensure that no single individual or groups are responsible for carrying out a transaction from its origin to its conclusion. The reasons behind this internal check in business organization, is to reduce the risk of frauds and errors that is likely to occur. These necessary procedures will help to detect and prevent such event.
Business organization are involved in different types of activities, these activities can be within, as well it can also be from within to outside the shores of the business organization. This managerial function is needed to measure and evaluate the effectiveness of other controls put in place within the business organization, and can be achieved through internal review, an appraisal of policies, plans, procedures, activities and records of the organization.
Business organization will get it wrong, if the process of recruiting staff in this organization is partial. This will affect the control system, especially where man know man is use as a criteria for recruiting staff. The internal control system will be affected negatively because the business organization is doing themselves more harm than good. Independence of such assigned staff that is expected to carry out this managerial function of internal audit can be questioned.
The assigned staff is expected to report on the effectiveness and efficiency of the accounting and internal control system and provide adequate suggestion on how there can be an improvement. The independence of this assigned staff to perform this internal check must be highly considered. The scope and objective of this assigned staff is based on the size and nature of the enterprises, skills and experiences will also be considered.
This internal auditor assigned to perform this basic function in the business organization will carry it out base on scheduled audit procedures in respect of the business transactions, procedures involves in the verification of assets and liabilities and ensuring that the managerial control system operate satisfactorily. The functions to be performed include;
Operational performances must be reviewed and reporting variances.
Accuracy and correctness must be checked, there is need to test the transactions and balances in the account.
Company policies must be reviewed and ensure compliance.
Organization’s assets must be safe guided.
Training on internal control matters and consultancy advice must be given.
Accounting system must be reviewed in the company.
Internal control system must be reviewed and ensuring compliance.
Special investigation need to be conducted.
The methods and procedures of carrying out internal audit work in the business organization depends on what area the internal auditor is expected to perform such tasks. It can be any of this area;
Management Audit- This audit helps in the appraisal of organization structure and policies to ensure efficient management.
Special Audit- This is an audit that is carry out on a special assignment such as investigation.
Company Audit- This involves auditing of company within a group of companies especially in a situation, it is a large company.
Functional Audit- This is the audit of a specific function in the organization e.g. Sales ordering
Operational Audit- This is the audit of specific set of operation within a department e.g. Cash audit
Organizational Audit- This involves the audit of the organizational set up, and it is associated with knowing how efficient the organization is.
This network of control established by the management will help to secure orderly and efficient operations, with compliance with management policies, which will enhance completeness and accuracy of the records. It is the responsibility of the management of business organization to set up adequate system of internal control.
In other to ensure the success of audit work some of the test carry out by the internal audit staff are as follows;
Substantive Test- Is the test of transactions and balances, and other procedures such as analytical review which seeks to provide audit evidence as to the consistencies, accuracy and validity of the transactions contained in the accounting records.
In-depth Test- This is generally cradle to grave tests which involves tracing transaction via the system from the point of origination to the point of conclusion.
Walk through Test- Is a procedure use to confirm that what is documented is how the system is supposed to exist. The aim is to obtain evidence that controls are been operated in practice
Compliance Test- This type of test provide audit evidence, that internal control procedures are been applied as prescribed. Failure to exercise control correctly will be confirmed by compliance testing, irrespective of whether an error had occurred or not..
For business organization to function well, internal control system must be given a place. For organization vision and mission statement to be achieved, internal control system assists directly or indirectly in the actualization of such statement. It provides reports on operation and variations from plans. It helps in minimizing the risk of frauds and errors to which the business organization is exposed to.