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Faculty of Business

accounting school

ACADEMIC REPORT

COURSE:

Financial audit

AUTHOR:

Justino Jara, Yasbely Yesenia

TEACHER:

Inga Flores, Judith

Chimbote - Peru

2023-1
Introduction

It is important to have an Internal Control System in the visual health centers, since it allows
them to control their resources and therefore improve their management. This control is
strengthened due to the practicality of measuring efficiency and productivity at the time of
implementation, especially if it focuses on the basic activities that companies perform.

It is appropriate to indicate that having an Internal Control System in a company facilitates the
execution of operations and contributes to apply evaluations that allow to have real knowledge
of the company's situation, therefore the importance lies in having a planning that is capable of
verifying the compliance of controls, to give managers a better vision of the activities.

Chávez, (2016), states that, in Peru, there is interest among companies and the government to
implement internal control systems to improve their processes in different areas. For their part,
Gómez, Bravo, Anchirayco(2016), add that our country is immersed in the struggle to achieve
the development of the economy and to achieve it, own efforts are the cornerstone in the
entire design and implementation of economic policy; and economic policy cannot be
materialized without the strengthening of internal and administrative control in the entities.

"Internal control is a process implemented by the highest authority, management and staff of
each institution, which provides reasonable assurance that resources are protected and
institutional objectives are achieved.

Elements of internal control include the organization, the suitability of personnel, compliance
with institutional objectives, institutional risks in the achievement of these objectives and the
measures adopted to deal with them, the information system, compliance with legal and
technical standards and the timely correction of control deficiencies".

Rivera, (2016) In his thesis presented to obtain the degree of Master in Public Management
called "Internal Control System and its relationship with the Work Performance of the
Collaborators of the Office of People Management of the Regional Government of San Martin,
2016" Universidad César Vallejo, in which the general objective was: Determine the relationship
between Internal Control System and the Labor Performance of the collaborators of the Office
of People Management of the Regional Government of San Martin, 2016, likewise the author
concludes that there is a positive significant relationship between the Internal Control System
and the Labor Performance of the collaborators of the Office of People Management of the
Regional Government of San Martin during the year 2016 since the Pearson correlation
coefficient obtained was r = 0.889; the coefficient of determination (0.790), explained that
approximately 79% of the Labor Performance of the collaborators is given by the Internal
Control System of GORESAM. Likewise, for the variable Labor Performance of the collaborators
of the Office of People Management of the Regional Government of San Martin during 2016,
the level of performance was "High" since the highest concentration of response was given by 8
collaborators representing the.

The objective of this work is to "Design an Internal Control System in the company AB OPTICAL
in the city of Loja", which becomes an indispensable tool for the company, where its content
includes control procedures as a measure that helps to prevent possible weaknesses and
irregularities in the management of these, therefore, the contribution in the development is
important, since by having an adequate and technically conceived system, its owner can
safeguard the human, material and financial resources as the decision making and the correct
management of its funds.

DEFINITION:

CONCEPT OF INTERNAL CONTROL ACCORDING TO INOFRME COSO

Internal control is a process executed by the board of directors, management and all personnel
of an entity, designed to provide a reasonable degree of assurance regarding the achievement
of objectives within the following categories:

Effectiveness and efficiency in operations.

The Ecuadorian Auditing Standard NEA 10 in its paragraph 8 defines the Internal Control System
as follows:
The term "Internal Control System" means all policies and procedures (internal controls)
adapted by the management of an entity to help achieve management's objective of ensuring,
as far as practicable, the orderly and efficient conduct of its business including adherence to
management policies, safeguarding of assets, prevention of fraud and error, accuracy and
completeness of accounting records, and timely preparation of reliable financial information.
The internal control system goes beyond those matters that relate directly to accounting
functions.

Importance of Internal Control

"Internal control brings many benefits, so investing in it makes it a strategic action of great
importance. In the financial area it generates savings by promoting operational efficiency; in the
administrative area it generates higher quality information for decision making; in terms of
safeguarding corporate assets, it reduces the possibility of being a victim of fraud losses by
reducing the operations of the perpetrators, among other benefits. "

General characteristics of Internal Control

"Internal Control is a process and therefore it can be evaluated at any point in its development.
It is a set of structured and coordinated actions, a means to an end. It is carried out by workers,
officers and managers, who act at all levels and in the different areas, people act at all levels
and it is not only about organization and procedures manuals.

No organization's manual covers all actual and potential risks, nor does it develop controls to
address each and every one of them. Consequently, the people who make up that organization
must be aware of the need to evaluate risks and implement controls that must be able to
adequately respond to them. In each area of the organization, the person in charge of directing
it is responsible for Internal Control before his immediate boss, in accordance with the
established levels of authority, and all the workers of the entity participate in its compliance,
regardless of their occupational category.

It should facilitate the achievement of objectives in one or more of the areas or operations in
the company.

This is a transcendental contribution since internal controls are not restricted elements but
enable processes, allowing and promoting the achievement of objectives, because it refers to
risks to be overcome in order to reach those objectives".

Internal Control Objectives

Ensure that all activities and resources of the organization are directed to the fulfillment of the
entity's objectives.
Stimulate the follow-up of the practices ordered by management
Protect the assets of the organization avoiding losses due to fraud or negligence.
Define and apply measures to prevent risks, detect and correct deviations that may occur in
the organization and that may affect the achievement of its objectives.
Protect the assets of the organization avoiding losses due to fraud or negligence.
Ensure the accuracy and veracity of the accounting and non-accounting data, which are used
by management for decision making.
To ensure effectiveness, efficiency and economy in all operations, promoting and facilitating
the correct execution of the functions and activities defined for the achievement of the
institutional mission.
To ensure that the internal control system has its own verification and evaluation mechanisms.

PRINCIPLES OF INTERNAL CONTROL

ü Equity: Activities must be oriented towards the general interest, without privileges granted to
special individuals or groups.

ü Ethics: This refers to the fact that operations must be carried out not only in compliance with
Constitutional and Legal Norms, but also with the ethical principles or principles of conduct that
should govern.
Effectiveness: There must be strategic and action plans in which objectives and goals for the
short, medium and long term are clearly identified.
Efficiency: Work processes must be organized and implemented to support the objectives and
goals, in the permanent search for optimal results.

Economy: Promotes that the results are obtained at a reasonable cost, that is to say, that the
best financial options are used without affecting the required quality, quantity and timeliness.
 Accountability: This principle refers to the obligation of the
public servants, to disclose in a timely and reliable manner the fulfillment of their
responsibilities.

 Preservation of the Environment: According to this principle the Ministry of

In this regard, López and Guevara (2015) state that the importance of having an internal control
system for companies lies in the fact that through this system, the entity's processes are
organized and focused on satisfying the needs at a given time, the assets that make up the
company's equity structure are protected, and the efficiency and effectiveness of the
operations implemented are verified.

Ruiz (2014) manifests internal control focuses on the internal control and improvement of
corporate governance, that is, on an optimal management of public or private resources;
providing efficiency and effectiveness for operational decisions, and financial reliability of
information, through compliance with certain standards that provide an acceptable degree of
security.

For Mendoza, García, Delgado and Barreiro (2018) a well applied IC contributes to obtain an
optimal management, generates benefits for the administration of the entity at all levels,
processes and activities since its implementation, helps to fight corruption, contributes to the
achievement of objectives and profitability and facilitates the assurance of reliable financial
information through compliance with laws and regulations in force.
Over time, internal control has received numerous connotations; today, discussions on the
concept of internal control, which can also be observed in the International Standards on
Auditing, lead to its recognition as a process drafted, implemented and maintained by persons
in charge of governance, management and other categories of personnel in order to provide
reasonable assurance regarding the fulfillment of an entity's objectives related to the credibility
of financial information, the efficiency and effectiveness of operations and compliance with
laws and regulations. It is worth noting the fact that this approach to internal control gains
importance due to the fact that it represents an area of interest Dănescu, Dănescu and Prozan,
2014).
Risk assessment allows a company to reason how the potential risk event impacts the
achievement of objectives. Management evaluates these events by probability, perspective and
impact, for this purpose it combines quantitative and qualitative methods; positive and
negative impacts of potential events should be examined individually across the company, to be
approached as an inherent and residual risk (Corre, 2016),

According to Barros (2015) the identification of risks in organizations should start with control
processes, because it is required to establish and execute policies and procedures to ensure the
effectiveness of operations, facing the possible risks of achieving the objectives proposed by the
entity. In this sense, the risks that appear in organizations, according to (Mantilla, 2016)

References :

López, O. and Guevara, J. (January-June 2015). Controle organizacional: uma visão comparativa
com o mundo. Accounting, 187. Retrieved on November 24, 2017, from
http://aprendeenlinea.udea.edu.co/revistas/index.php/cont/article/viewFile/26132/2077941

Mendoza, W., García, T., Delgado, M. e Barreiro, I. (2018). Controle interno e sua influência na
gestão administrativa do setor público. The Sciences, 206-240
Barros, R., (2015). Os riscos das companhias de seguros no âmbito do Enterprise Risk
Mnagement (ERM) e controle interno. Inovar Revista de ciências administrativas e Sociais, 61-
70.

Ruíz M. (2014). Research Study: Qualitative and quantitative approach.

Briciu, S., Dănescu, A., Dănescu, T. e Prozan, M. (2014). Um estudo comparativo de modelos de
controle interno bem estabelecidos. Procedia Economics and Finance, 15,
1015-1020.
Rivera, J. (2016). Internal Control System and its relationship with the Work Performance of the
Collaborators of the Office of People Management of the Regional Government of San Martin,
2016. Tarapoto. Retrieved from
http://repositorio.ucv.edu.pe/bitstream/handle/UCV/852/rivera_vj.pdf?
sequence=1&isAllowed=y