TABLE OF CONTENTS The design of an internal control system starts with a definition of goals: What exactly are we after in terms of good governance? At which level of transparency do we want the internal control system to operate? How capillary should it be? What do we wish to accomplish? At what level of timeliness and dependability? The next step includes identification of the sources of information that should contribute to internal control. This should be followed by:
Evaluation of current internal control policies and practices, and
An examination of the reliability of the existing internal control system.
For internal control to work correctly, it is important that there is no covering-up of problems by 'this' or 'that' manager, at any level of the organization. IFRS contributes a great deal to the mechanics part of internal control by promoting transparency and by bringing fair value into perspective. But top management must also play its part by:
Assuring the dynamics of the financial reporting system, and
Seeing to it that the organization's arteries are not clogged through opacity, indifference, inability, or conflicts of interest.
Internal control works well only when decisions, actions, and results obtained by all managers, at every business unit, are characterized by openness, objectivity, and transparency in appraising their own performance and that of others. Everything counted, this is the simple, most valuable index of management's strength.
Take risk management as an example. No effective risk evaluation process can take place without identification of all relevant sources of...
