Question 1 of the 2011 Examination Paper

The success or failure of an entity depends on its system of controls both accounting and administrative. Identify and discuss some of the key factors of the internal control systems of an organization with which you are familiar.

Internal Control is 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 objectives are being achieved:

* Executing orderly ethical, economical, efficient and effective operations - the operations have to be well organized, methodical, and consistent with the organizations’ missions; * Fulfilling accountability obligations – the organizations and the employees within them are held responsible for their decisions and actions, including their stewardship of public funds, fairness, and all aspects of performance; * Complying with applicable laws and regulations – the organizations are required to comply with the laws and regulations relating to internal control systems; and * Safeguarding resources against loss, misuse and damage – controls should be embedded in each of the activities related to managing the entity’s resources from acquisition to disposal.

Resources in the Public Sector generally entail public money and their use in the public interest generally requires special care, the significance of safeguarding resources in the public sector needs to be stressed. Moreover budgetary accounting on a cash basis is still a widespread practice in the public service but it does not provide sufficient assurance related to the acquisition, use, and disposition of resources. As a result, organizations in the public sector do not always have an up-to-date record of all their assets, which makes them more vulnerable.