Electronically activating internal control system

Since the dawn of time, the concept of internal control system has been established in the nature of humanity. 

Kings of the Pharaohs and the Greeks, for example, paved the way to establish an internal control system by controlling tax collection and punishing traffickers and robbers.

Islamic civilisation has laid the usual foundations for building an internal control system. Islam has forbidden taking money unrightly and urging every Muslim to watch himself and his actions.

It also organised the sources of funds from booty, Zaka and others, defined spending methods during the reign of Caliph Omar ibn Al-Khattab to begin the first stages of the emergence of the internal control system.

Thus, we can understand in a simple way that internal control means ensuring that fund-raising is carried out in proper ways and following policies and procedures established by the governor or official.

Now in institutions, banks and companies, it is clear that there is a strong internal control system to keep the organisation and its funds from theft and embezzlement and ensure that all the company’s business and its employees are proceeding by its policies.

Hence, we can shorten the concept of an internal control system for organisations and companies in the following definition:

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The internal control system, according to the COSO model.

It is short for the Committee of Sponsoring Organizations concept.

COSO model sets internal control standards that preserve the organization's property and the organization of its working methods. 

As a comprehensive definition of the internal control system, we can say that it is a total of guarantees that include written and oral policies and methods of work and instructions directed by the Board of Directors to all institution departments. 

These guarantees aim to control and protect the financial disclosure of the organization, audit information and improve performance. And raise efficiency.  

Features of the internal control system

Define the functional structure and clarity

It is incumbent upon the internal control system to determine the responsibility and authority of every employee within the organization so that he cannot infringe his power and his actions are held accountable within the framework of the authority granted to him. Creating a functional structure helps strengthen relationships between managers and their employees, provide opportunities for innovation and develop a sense of responsibility within each employee. It also helps significantly reduce costs, speed and completion of work.

The efficiency of those responsible for the internal control system

The system's integrity depends on the efficiency of the staff responsible for implementing it. It is never wise to give internal control to a person who has no confidence or doubt in his secretariat. Management must establish rules for selecting internal control personnel, including:
• Selection is made according to specific qualifications and recipes, and the most fulfilling qualifications are selected.
• Training programs and focused courses are being developed to raise the efficiency of internal control appointees and build their sense of responsibility.
• Establish specific internal control standards and monitor the performance of employees on them periodically in direct and indirect ways.
• Motivate internal control personnel with high rewards and incentives.
• Activate the rotation system of employees and move jobs between them so that manipulation and errors are detected, and any manipulator or embezzler is deterred.

Separation of employee responsibilities

One of the essential characteristics is that the internal control system must separate each job from another avoiding assigning two interrelated functions to the same employee, especially if it concerns treasury, assets and goods. It is not correct, for example, to assign the function of collecting bills and money and recording them in books and depositing them to the same person, as he can easily manipulate and embezzle.

Accuracy of the organization's organizational Plan

The job structure determines each employee's responsibility. At the same time, the organizational plan explains the responsibility and powers of each department and the way of coordination between each department and another, which significantly facilitates the work of internal control and evaluation of the performance of each department and its employees.

Safety of books and records

Internal control is fundamentally dependent on records and books. Therefore, it is necessary to correctly record all company operations and actions to make it easier for oversight officials to detect errors and manipulation.

The integrity of Internal Audit Management

A proper internal audit can easily detect any deviations and thus facilitate the internal control system. One of the best procedures to ensure the integrity of the internal audit management is not affiliated with any department but directly following the Chairman of the Company's Board of Directors.

The objectives of the internal control system

Internal control has several objectives, including but not limited to: 

The internal control system ensures that the work is carried out accurately and efficiently.

It ensures the accuracy of financial statements.

The internal control systems encourage employees to work following established instructions and policies.

It ensures that the work is carried out according to organized and ethical standards.

It protects enterprise funds from theft and embezzlement and protects the company from crises and losses.

The internal control system provides very accurate reports and information to company owners and board directors.

It enables achieving the organization's primary goal of increasing profits.

It verifies the disbursement of company funds in the areas allocated to it.

The internal control system takes control of the inventory of goods, the covenant and the stores.

It Protects company and state property from infringements.

It protects the organization's records from being presented to non-responsible entities that do not have the right to do so. 

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Types of Internal Control System

Internal control is divided into three types, and the appropriate type is determined according to the purpose for which it will be created. The types of the internal control system are:

spyware

Internal control for protection and prevention

The control system is established to evaluate the performance of the company’s employees, raise their efficiency to the highest degree and reduce or prevent errors before they occur.

The control system in this type also aims to separate the duties and responsibilities of each establishment employee and ensure the actual availability of assets and all information recorded in records and books. 

 

censorship

Internal control for detection

It aims to detect problems and errors as they occur, record all calculations using double entry and prepare and review financial adjustments and audit balances every month. 

verify

Internal control for correction

After internal control detects problems and errors, internal control comes to correct.

It tries to solve problems, identify the causes, reduce future problems and fade their reasons. 

It also keeps copies of the main files and corrects errors resulting from entering incorrect system information and entering processes correctly. 

 

The types of internal control can be divided into:

administrator

Administrative control

All procedures and methods are used to achieve productive efficiency and adhere to administrative decisions and policies such as quality control, performance reports and statistical statements. 

accounts

Accounting control

Methods used to protect assets, ensure the integrity of books and financial records and financial protection of an investment. 

kyc

Internal control

It aims to control and monitor institutional processes and ensure that they are carried out following the laws. 

It also includes all procedures and plans to protect assets from theft and embezzlement. 

Internal control in government institutions

The internal control system in government units achieves many objectives, including ensuring that the work of the government institution is performed efficiently and in an ethical manner, preserving state property from loss or misuse, and ensuring that its work is conducted following laws and policies.

It also guarantees the use of all financial and human resources and organs and protects the government institution from corruption and lack of transparency. 

Examples of government agencies that apply internal control include: 

 

The internal control system in banks

Internal control in banks enables review and monitor all activities carried out by the Bank. It aims to exploit the Bank's resources, raise its profits and evaluate the efficiency of the Bank's employees and their compliance with regulatory laws and instructions. Internal control in banks is done by the Bank Manager and all committees and employees of the Bank.

 

The internal control system in charities

Internal control of charities aims to review administrative and financial statements and ensure their credibility, ascertain the sources and resources of funds, ensure that funds are disbursed to them, eliminate misuse, protect assets and raise the efficiency of employees and shareholders association. 

 

The internal control system in insurance companies

Internal control systems aim to review the efficiency and quality of services provided by insurance companies and highlight the importance of insurance companies in the country's national economy. 

It also aims to raise insurance awareness among individuals and develop proposals to increase the profits of insurance companies and estimate and fade future losses. 

 

The impact of the internal control system on the companies growth

Of course, internal control positively affects the development of companies, raising the company's efficiency and achieving the financial profit it aspires to. It affects all departments within the company.

The impact of internal control on stores

The internal control system helps prevent errors or theft of any item within the company’s stores and the stock of goods.

The impact of internal control on revenues

The most important objectives of internal control are to preserve the property and assets of the organization from fraud or manipulation, ensure that the policies set are followed, improve the efficiency of employees, and other objectives to make internal control achieve an increase in the rate of profit and revenue. 

Impact of internal control on expenses

The proper internal control system establishes laws that deal with expenses and payments. For example, it prevents the opening of current accounts in banks except by the administration’s decision to determine who is allowed to open accounts and grants them signature and exchange authorities. 

Payment is sent through cheques. The internal regulatory system considers that cheques are better than treasury cash that can be stolen, as cheques can be easily tracked.

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The impact of internal control on installations

The concept of installs means assets owned by the company of all physical, moral and financial types. Internal control aims to maintain installations and protect them from theft or misuse. It also seeks to ensure the integrity of records and books and that the installations are recorded accurately, thus giving business owners a true and accurate picture. 

The impact of internal control on financial reporting

Internal control issues accurate financial reports on the status of the company and the business it performs, which will help capital holders make appropriate decisions and increase competition and expand the company’s business. 

Impact of internal control on human resources

Poor internal control necessarily leads to a deterioration in the performance of human resources. The functional rotation developed by the internal control system helps raise the efficiency of execution maximize and best benefit from the company’s human resources. 

What advantages does digital transformation achieve?

Now in the era of technological development, all companies and institutions are looking for a digital transformation to change their business system. The advantages achieved by digital transformation includes:

Digital transformation saves a lot of time, effort and money.

  • It reduces errors, especially with the availability of comprehensive accounting programs, making it easier to detect and resolve errors quickly.
  • It provides interdepartmental coherence and coordination increasing work efficiency.
  • Digital transformation ensures that work is proceeding according to planned traffic plans and decisions.
  • It provides accurate reports that enable directors to make appropriate decisions.
  • Digital transformation avoids problems and confrontations between the manager and management members.
  • It gives managers time to think about decisions that make more profits than a daily follow-up to work performance.
  • Digital transformation enables capital owners to measure their company’s performance and evaluate its progress.
  • It avoids exposure to the risk of fire or loss, etc., records and books.
  • Digital transformation facilitates signing and working procedures instead of disrupting work like paper documents that waste time and money. 

However, digital transformation does not come between day and night. But it comes from experience and learning. 

ECPA offers you the best advantages of accelerating digital transformation, modern communication systems and the best information technologies to start your successful digital transformation as soon as possible.

Our specialists provide advanced services that reflect our extensive experience. We also offer the best methods and technical methods to suit your company and comprehensive support services available throughout the day. Our services cover many companies in Egypt and the Arab world.

What experiences do we have to make us your best choice for digital transformation?

Sometimes companies seek transformation depending on their team, which lacks all experience and knowledge, leading to the failure of the digital transformation. 

Still, successful management chooses a trusted and internationally recognized company such as “ECPA” for that task.

ECPA understands how to benefit from digital transformation leading your company to increase profits and avoid any expected loss. 

At ECPA, our first goal is to save effort and time and increase your productivity and profits as soon as possible. 

Let me tell you briefly what benefits we will offer you:

  • ECPA has a fully trained team of accounting and business management experts and consultants working around the clock to make your company a success. 
  • We enjoy a spirit of cooperation, participation, meaningful discussion and communication with management levels to complete the work successfully.
  • We provide companies with complete maintenance and control of infrastructure, helping to quickly detect any problem and quickly solve it by a team of experts.
  • ECPA provide tools and systems for digital analytics that help you analyse and evaluate your data.
  • We contribute to simplifying the technological process within the company. 
  • We also enable you to evaluate your team’s performance and put the right person in their place. 
  • Our team is available 24 hours a day and seven a week to provide your team with the steps needed for their success.
  • We will provide you with a talented and expert accounting group to create a comprehensive database, evaluate your needs, identify the required skills and what suits your team. 
  • We work with your employees in a team spirit to make their company successful.

What is the advantage of our consulting expertise in the digital transformation business?

If you ask yourself why I choose ECPA rather than other companies, I would like to tell you that our company’s experience has already proved to be the best. 

We have participated in the digital transformation and the success of many of our customers in a way that made them one of the best companies in the Arab world.

In our company, we are interested in detailing accounting software that is consistent with your needs and suits the development and success of your company. 

Following the accounting and auditing standards applied in your country and the world, we contribute to your company’s success away from personal opinions, non-professionalism and ill-considered processing methods.

You can now benefit from our vast and skilled expertise in digital transformation software, its latest methods and how to activate it in your company. We promise that you will not regret that step with ECPA.