2.0 Objectives of an internal control system
2.1 Identify customizable components
2.2 To identify factors that promotes the effective implementation of internal control system. 2.3 Challenges associated with internal control systems. 2.4 Limitations of internal controls
2.5 To identify the top rated types of internal controls.
CHAPTER TWO 1.9Introduction
The literature review for this study will be done on the following: to identify the objectives of an internal control system, to identify customizable components of common internal control systems in Ghanaian companies, to identify factors that promotes the effective implementation of internal control systems, to identify the common challenges associated with implementing internal control systems in Ghana and To identify top rated types of internal controls systems used in Ghana in terms of their effectiveness for the companies using them. Review of Internal Control Systems
According to the business dictionary, an internal control is defined as a systematic measure instituted by an organization to conduct its business in an orderly and efficient manner and also to detect errors,fraud and theft. It is also a measure to ensure accuracy and completeness of its accounting data and ensure adherence to its policies and plans. Under COSO (the committee of sponsoring organizations of the treadway commission) also defines internal controls as a process, effected by an entitys board of directors, management, and other personnel, designed to provide reasonable assurance regarding the acheivement of objectives. DFA(Department of financial administration) defines internal controls as a process, effected by an entitys board of directors, management, and other personnel, designed to provide reasonable assurance regarding the acheivement of objectives in the following: •Efficiency and effectiveness of operations
•Reliability of financial reporting
•Compliance with laws and regulations
Although this formal definitions refers to internal control as a process, it should be viewed as a series of actions that permeate the entire state government. Internal control exist in the basic management processes of planning, executing and monitoring. According to DFA, it should not be viewed as an add-on to these basic management processes but should be viewed as an integral part of them and they should be placed at strategic points to help ensure that objectives are achieved. DFA and COSO believe that an internal control consiste of five components namely: Control environment which has to do with the attitude that management has about internal controls. Once there is a believe that internal controls are important to the entity, it is implemented and communicated to employeesand is most likely to function effectively. Risk assessment is another component which is used to identify , analyze, and manage the the potential risk that can hinder or prevent the organization from achieving its objectives. Control activities defined by DFA and COSO are the policies, procedures, techniques and mechanisms that enforce managements directives. They help ensure that actions are taken to address risks. Internal control activities are an integral part of an entity’s planning, implementing, reviewing and accountability for stewardship of government resources and achieving effective results. Information and communication is where the entity control its operations to achieve its desired objectives. Communication relating to operational and financial data is needed at all levels of an agency in relevant, reliable and timely way. With communication, personnels are able to know their job responsibilities and their activities relate to the work of others. Monitoring is the final component which has to do with the checking of the systems. Periodically,...