Matakuliah
Tahun
: Manajemen Kinerja Sistem Komputer
: Feb - 2010
04. Internal Control
Over Transactions
Pertemuan 07-08
04. Internal Control over Transactions
01. Internal Control Concepts
Figure 4.1
To illustrate what is included in internal control,
figure 4.1 shows management's activities
divided into two groups : management decision
processes and internal control.
Figure 4.2
• Figure 4.2 shows a conceptual diagram of the
expected decision error cost and risk premium
decreasing with increasing internal control
"quality".
• Figure 4.2 also shows internal control operating
costs rising as internal quality increases.
Figure 4.3
• Figure 4.3 shows the vice presidents for
Operations, Marketing, and Human resources
having primary authorization duties,
authorization acquisition, production, and sale
of goods and services comprising the core
process of the firm.
The FCPA incorporates four important requirements for
internal controls regarding accounting information :
• Transactions are executed in accordance with
management's general or specific Authorization.
• All transactions and other events are promptly recorded
in the correct amount, in the appropriate accounts, and
in the proper accounting period so as to permit
preparation of financial statements in accordance with
GAAP.
• Access to assets and records is permitted in
accordance with management 's authorization.
• Recorded assets are compared with existing assets at
reasonable intervals and appropriate action is taken
regarding any differences.
02. COSO Internal Control Framework
03. Two Examples: Materials Acquisition
and Derivatives
Materials Acquisition.
• Traditional Processes.
– Figure 4.4 diagrams traditional business processes and
measurement and compliance processes for a producer (your
company) and its supplier.
• Re-engineered Processes
– Figure 4.5 diagrams material acquisition for re-engineered
processes based on a business or alliance with the supplier,
electronic data interchange (EDI), and enterprise software.
Derivatives
Figure 4.6 shows five parties within the
firm, the outside (counter) party with
whom interest payments are exchanged,
and the underlying basis information
(LIBOR) that fluctuates over time.
04. Financial Misstatements: Errors and
Fraud
Three broad categories of Misstatement :
•
•
•
1. Errors by employees or management -- accidental misstatement in
sensing measurement, classification, or calculation, or omission from
display.
2. Misappropriation fraud -- intentional misstatement of recorded amounts
by employees, ordinarily accompanied by theft of company assets such us
cash, inventory, or fixed assets.
3. Misrepresentation fraud -- internal overstatement of record assets,
understatement of record liabilities, or useof improper accounting methods
or biased accounting estimates with the intent of overstating a performance
measure such us net income or an activity base such as total assets or
equity.
Figure 4.7
• Figure 4.7 classifies each as to intent , person
(s) responsible, whether assets are missing,
and expected effect on net assets and net
income.
Internal Control Design
In concept, the most important single control
against error and both types of fraud is the
initial recording of assets as they are acquired
by the firm, such us revenues due the firm for a
sale on account.
Empirical data on Fraud.
• Aggregate data to evaluate the seriousness of
accidental data processing mistakes are difficult to
obtain.
• Empirical data on the relative incidence and magnitude
of employee fraud are also limited.
• The KPMG survey also shows that poor internal controls
were the most frequently mentioned factor allowing
frauds to occur (about 60 percent), while factors
affecting inherent limitations of internal control reliance
by management were also important.
05. Informing Yourself about Internal
Control
Internal Auditors
• For your own company, you can hire an internal auditor to act as
your monitoring agent.
• Monitoring activities by internal auditors are an especially important
part of internal control because of the investigative competence
and independent point of view that internal auditors can bring to the
evaluation of business processes.
• Figure 4.3 showed the internal auditor reporting to the president and
chief executive officer.
External Auditors
• You can also obtain information about the
effectiveness of internal control in your own firm
from your external auditor hired to audit your
financial statement.
06. An Internal Information Risk Model
Stringency
Management's objectives regarding internal control are likely to be
more stringent than those of outsider.
– As an example , external auditors are responsible for detecting and
correcting material misstatements where "material" might be 5 to 10
percent of the firm's earnings.
– From management's prospective, an error of 1 percent or even 0.5
percent of earnings might be important enough to initiate follow-up
actions.