Internal Control, Audit & Performance Measurement

Internal control, Audit and Performance Measurement

Auditing

Auditing is one of most important aspects of financial institutions. Today, the auditing firms in Europe in general, and in Britain in particular are in a state of shock in the wake of recent media reports regarding the prevailing irregularities in the financial sector. The company's crisis can be explained by the influence of external factors, they can be the determining cause much of its success or failure without giving up their course on the influence of internal factors must also be taken into account.

Audit plays a very important role in serving the interest of organizations and people in general. It strengthens the accountability and reinforces trust and confidence in financial reporting. It also maintains a check on the performance of managers, who can exploit the resources of the firm using their skill. Scandals like Enron and WorldCom in the U.S. or Parmalat in Europe have increased the significance of Auditing. It is now imperative for public organizations and managers to comply with accounting principles and regulations in order to avoid such scandals in future (Barber et al, 1999).

The areas that may require enhanced audit work are:

Assessments at fair value

Impairments that are not temporary

Credit derivatives

Pensions and other post-employment

Claims

Stocks

Impairment of other assets

Deferred taxes

Disclosures

Public interest in relation to the Accounting and Audit

The International Federation of Accountants (IFAC 2010) soundly defines the public interest as any individual or entity, which is affected, by the work of the accountancy profession: in other words, society as a whole. What is expected of the accountancy profession in relation to the public is the safeguarding of interest. These interests may consist of providing accurate financial information, ensuring it is of a uniform standard, organizational success and so on. Due to the way in which statements are drawn up in one organization, is uniform in others, undoubtedly increases the need for precision and comparability to be of a reliable and virtuous nature. This is to enable healthy competition and allow outsiders to compare different organizations, with a standard gauge: it is this which is of public interest. It is the responsibility of auditors to provide a public service in verifying the accounts of organizations: the facilitation of financial markets depends on it. It is observed that accountancy was created into a profession, specifically in Scotland in the 19th century, due to selfish economic reasons.

Internal Control System

Public organizations are greatly influenced by their organizational structure and management. They are the trend setters of the organization and management's philosophy plays an important role in determining and setting out procedures and systems. Technologically advanced companies use automated system of accounting whilst new arrivals initially rely on the manual system. Further, there are certain regulations posed by the regulators depending upon where the business has laid its operations and listing priorities (Vijayakumar et al, 2012).

The internal control comprises the plan of organization, the methods and procedures that have implemented an enterprise or business, structured as a whole to obtain three fundamental goals:

a) Obtaining secure and sound financial ...