Transcript Slide 1

Session 1 & 2
COSO, the Committee of sponsoring organizations of
the tradway commission is a private sector institute
established in 1985. Committee comprises of:
I.
II.
The Institute of Internal Auditors
American Institute of Certified public
Accountants
III. American Accounting Association
IV. Institute of Management Accounts
V. Financial Executives Institutes
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COSO goal is to improve the quality of financial
reporting through a focus on corporate
governance, ethical practices and internal control.
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COSO’s definitions of internal control is as follows:
A process, effected by an entity’s board of
directors, management, other personnel designed
to provide reasonable assurance regarding the
achievement of the objectives.
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INTOSAI defines the Internal Control as an integral
process that is effected by an entity’s management
and personnel and is designed to address risks
and to provide reasonable assurance that in
pursuit of the entity’s mission, the following general
objective are being achieved.
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• Executing orderly, ethical. Economical, efficient
and effective operations
• Fulfilling accountability obligations
• Complying with applicable laws and regulations
• Safeguarding resources against loss misuse and
damage
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Internal Control is a dynamic integral process.
Management and personnel at all level have to be
involved in this process to address risks and to
provide reasonable assurance of the achievement
of the entity’s mission and general objectives.
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• Reasonable assurance recognizes that the cost of
internal control should not exceed the benefit
derived.
• Some time cost may appear excessive, but they
may be critical to maintaining public confidence in
Government and related organization.
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Internal controls are designed to achieve following
general objectives:-
Executing Orders: Means in well organized way,
methodical. It is synonymous to executing work
systematically. System comprises of men,
material, method etc.
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Ethical :- General expectations are that public
servants should serve the public interest with
fairness and manage public resources properly.
Citizens should receive impartial treatment on the
basis of legality and justice.
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Economical : means that the broad principles of
orthodox finance are borne in mind not only by
disbursing officers but also by sanctioning
authority. The expenditure not merely conform to
rules or orders of competent authority but extends
beyond formality to its wisdom, faithfulness and
economy.
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Efficient: refers to the relationship between the
resources used and the outputs produced to
achieve the objectives. An efficient operation
produces the maximum output for any given set of
resource inputs.
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Effectiveness: refers to entire gamut of the
programme, scheme or project, right from the
conception to execution, commissioning, ultimate
operation and functioning/performance is covered
in such a appraisal.
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Fulfilling accountability obligations.
Accountability is a process whereby public service
organizations and individuals within them are held
responsible for their decisions and actions
including their stewardship of public funds,
fairness, and all aspects of performance.
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• It compasses:
– Fiscal accountability
– Managerial accountability
– Programme accountability
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Compliance with laws and regulations
Strict adherence to laws and regulations in
expending/receiving public funds creates
confidence in people at large, and therefore it is
essential that laws/regulations applicable are
followed.
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Safeguarding resources against loss,
misuse and damage due to waste, abuse,
mismanagement, error, fraud and
irregularities.
Government expenditure generally embody public
money and their use in public interest required
special care. Whether effective control exists over
physical custody of goods, cash investment scripts
and fixed assets.
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Limitation on Internal control effectiveness
• Human factor
• Resource constraints
• Organizational changes and management attitude.
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Internal Control consists of five interrelated
components
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Control environment
Risk assessment
Control activities
Information and communication
Monitoring
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