"INTERNAL CONTROL IN THE

BUSINESS WORLD"
DOCENTE:
BURGA TARRILLO, CELINDA CONSUELO
EXPOSITORES:
Barrueto Carbajo, Oscar
Benavides Huamani, Pamela
Guerrero Flores, Keyra
Morales Mejia, Angelo
Padilla Blanco, Paolo
SEMESTRE 2024-A
CALLAO - PERÚ
 INTRODUCTION
The division of labor and modernization have impacted the wThroughout business
history, internal control has gone from being exercised directly by the owners to a more
complex structure due to the division of labor and the modernization of systems. The
importance of internal control lies in ensuring the protection of assets, the reliability of
accounting records and the fulfillment of business objectives.
The evolution of companies has led to the need to establish organizational plans,
methods and procedures to guarantee effective management aligned with management
guidelines.ay control is exercised in organizations.
 Concept and nature
In its broadest sense, internal control
encompasses the organizational structure,
policies, organizational plan, methods and
procedures, as well as the qualities of the
company's personnel. Its main objective is to
ensure that assets are properly protected,
accounting records are reliable and the entity's
activity is carried out effectively according to the
guidelines established by management.
 Concept and nature
As companies have evolved, it has become essential to
delegate responsibilities and establish controls to keep
the actions of owners and managers together. This
allows the company's actions to be guided towards
achieving its objectives. Therefore, companies must
establish organizational plans, methods and procedures
that guarantee the protection of assets, the reliability of
accounting records and the effectiveness in the
development of business activity.
Concept and nature
In summary, internal control is a set of elements that
seek to ensure the correct management of the
company, protecting its assets, guaranteeing the
reliability of accounting information and ensuring that
the entity's actions are aligned with the objectives
established by management.
 Responsibility for the implementation and
maintenance of the I.C
From the definition of I.C., it can be inferred that it provides reasonable, but not
absolute, assurance that its objectives will be achieved.
The implementation and maintenance of an I.C. system is the responsibility of
management, which must subject it to continuous monitoring to determine if it is
functioning as prescribed, modifying it if necessary, according to circumstances.
Management must determine the scope and nature of the controls to be
implemented, depending on the volume of transactions, the degree of control
that management itself is capable of exercising, geographical distribution, etc.
 Responsibility for the implementation and
maintenance of the I.C
Management will therefore be responsible for administering shareholders'
assets or investments and providing them with adequate and reliable financial
information. In exercising this responsibility, management is exposed to
significant risks, among which we can highlight:

Decision-making based on erroneous information, such as incorrectly

prepared annual accounts or significant data errors.
Uncontrolled losses of the entity's assets.
 Limitations of I.C.
Every I.C. system, no matter how comprehensive, has a series of
limitations that are inherent to the system. There is always the possibility
that errors may arise when applying control procedures for various
reasons:

Misundersta Errors in Lack of Human

nding of judgment personal failures
instructions attention

Misundersta Negligence Fraud, etc.

ndings
 Limitations of I.C.
Furthermore, those procedures whose effectiveness is based on the
segregation of duties may be circumvented as a result of collusion among
employees involved in the I.C.
Similarly, procedures based on the objective of ensuring that transactions
are executed according to terms authorized by management would be
ineffective if decisions were made in an erroneous or irregular manner.
Every I.C. system entails significant limitations that cannot be overlooked,
as on one hand, controls cannot be implemented if their cost exceeds the
benefits derived from control, and on the other hand, the cost-benefit
evaluation is a subjective process based on management's best estimates
and highly dependent on the organizational structure.
Limitations of I.C.
Additionally, no matter how complex internal
controls may be, they can never guarantee that
errors or irregularities will not occur.
Therefore, the aim is for the controls to provide a
"reasonable assurance" that these irregularities
will be detected and prevented from occurring.
Objectives of the Accounting Internal
Control (IC) and Transaction Stages
The objectives of the accounting internal control
system should be related to each of the stages
through which a transaction passes. The most
important stages related to a transaction include:

Authorization Custody and

Execution safeguarding of assets
Recording that may result from
said transaction.
How to Implement and
Achieve a Good IC System?
Once objectives are defined, it will be
necessary to install a system that includes
the techniques and procedures needed to
achieve this goal. An IC system must
therefore comprise the set of techniques
necessary to achieve certain internal
control objectives.
Based on the Basic IC Objectives:

Safeguarding of assets
Reliability of information

The following generic control objectives, applicable

to all companies, have been identified,
differentiating them into two major groups:

GENERAL OBJECTIVES:
Authorization
Classification
Verification and evaluation
Physical protection of assets
Operational IC objectives
1. Recognition of 4. Reporting
Economic Events Integrity

2. Acceptance of 5. Database
Transactions Integrity

3. Processing 6. Link
Integrity Integrity
 INTERNAL CONTROL TECHNIQUES
Is a highly useful tool, as it allows for the identification, in detail, of
the necessary techniques to achieve specific objectives.

Preventive Techniques Detection Techniques

Authorization of all transactions. Physical inventories of stock.
Pre-data processing validation. Use of pre-numbered
Double verification of data entered. documentation.
Segregation and rotation of Comparisons of actual data with
functions. budgets.
Clearly defined standards and Bank reconciliations.
procedures Internal auditing
 INTERNAL CONTROL
The organizational
structure
ELEMENTS Accounting policies
and procedures
Policies and
Fundamentally comprises operational procedures Including the entire
the definition of areas of Regarding purchases, sales, information system
responsibility, lines of production, inventory
authority, communication of the company.
management, investment
channels, and levels of
policy, finances, etc.
hierarchy.
Internal Control Guidelines
Organizational Structure
Clearly define Assign functions to
responsibilities, individuals based on their
authority, etc. capability and authority
level.
Segregate functions of
decision-making,
physical asset custody,
and accounting.
Internal Control Guidelines
Accounting Policies and Procedures
Equip data processing Maintain consecutive
teams according to the numbering of vouchers
entity's volume and type for better document
of operations. control.

Design records and Establish appropriate

vouchers efficiently for information circuits for
clear understanding and enhanced control.
use.
Internal Control Guidelines
Accounting Policies and Procedures
Integrate diverse Apply reasonable
information for accounting criteria
consistency and consistent with
reconciliation. generally accepted
principles.
Provide accounting
Execute routine
information with
additional controls
necessary frequency
systematically for
and timeliness.
information validity.
Internal Control Guidelines
Internal Audit
Ensure the internal Ensure the internal audit
auditor's independence scope covers the entire
by reporting to an company.
appropriate level within Organize the internal
the company. audit function effectively
to achieve control
Define audit objectives objectives.
clearly, including whether
it includes financial or
operational audits.
Thank YOu
FOR YOUR
ATTENTION