Evaluating and improving internal control in organizations - updated 7.23.12

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IFAC Board

Final Pronouncement
Exposure Draft
June 2012
October 2011
Comments due: February 29, 2012

Professional Accountants in Business Committee
International Good Practice Guidance

Evaluating and Improving
Internal Control in Organizations

The mission of the International Federation of Accountants (IFAC) is to serve the public interest by:
contributing to the development,adoption and implementation of high-quality international standards and
guidance; contributing to the development of strong professional accountancy organizations and
accounting firms, and to high-quality practices by professional accountants; promoting the value of
professional accountants worldwide; speaking out on public interest issues where the accountancy
profession’s expertise is mostrelevant.
The PAIB Committee serves IFAC member bodies and professional accountants worldwide who work in
commerce, industry, financial services, education, and the public and not -for-profit sectors. Its aim is to
promote and contribute to the value of professional accountants in business. To achieve this objective, its
activities focus on:


increasing awareness of the important rolesprofessional accountants play in creating, enabling,
preserving, and reporting value for organizations and their stakeholders; and



supporting member bodies in enhancing the competence of their members to ful fill those roles. This
is achieved by facilitating the communication and sharing of good practices and ideas.

Copyright © June 2012 by the International Federation of Accountants(IFAC). For copyright, trademark,
and permissions information, please see page 24.

GOOD PRACTICE GUIDANCE
EVALUATING AND IMPROVING INTERNAL CONTROL
IN ORGANIZATIONS
CONTENTS
Page
1. Introduction .....................................................................................................................

4

2. W hy Internal Control is Important...................................................................................

4

The Roles of Professional Accountants in Business ......................................................

5

3. Key Principles of Evaluating and Improving Internal Control .........................................

6

4. Practical Guidance on Implementing the Principles .......................................................

7W hat should the scope of internal control be? ...............................................................

7

W ho should be responsible for internal control? ............................................................

9

W hat other internal control responsibilities/actions should be expected from a
governing body and management?.........................................................................

10

How could management’s genuine attention on internal control objectives be obtained?

11

How should those involved in the internal control system live up to their responsibilities?

12

How should internal controls be selected, implemented, and applied? .........................

12

How can internal control be better ingrained into the DNA of theorganization? ............

14

How should internal control be monitored and evaluated? ............................................

15

How should the organization report on internal control performance? ...........................

18

Appendix A: Definitions
Appendix B: Resources

3

Evaluating and Improving Internal Control in Organizations

1.

Introduction

1.1

One ofthe best defenses against business failure, as well as an important driver of business
performance, is having an effective internal control system, which manages risk and enables the
creation and preservation of value. Successful organizations know how to take advantage of
opportunities and counter threats, in many instances through effective application of controls, and
therefore improve...
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