Limitations of internal accounting controls and future development

Paper Keywords: the limitations of sound internal accounting control
Abstract: The internal accounting control is to improve the quality of accounting information, protecting the security of assets, complete, relevant Laws, regulations and rules and regulations to ensure the implementation of the development and implementation of a series of control methods, measures and procedures. It is the basis of enterprise operation In a business in a more important position. However, the limitations of internal accounting control itself, so in many cases can not play its role well. So, in today's economic context, internal accounting controls must be further improvements.

Overview of the first part of internal accounting control
Internal accounting control thought, whether in domestic or foreign, have a long history, the early focus on the books of the internal cross-checking the information contain (internal check is thinking of internal accounting controls in the embryonic stage of .1936, AICPA issued <"The Independents public accountant review the financial statements>> for the first time the definition of internal accounting controls, it is pointed out that the so-called "internal audit and control system" is defined as cash and other assets to ensure the safety, check the accuracy of books and records taken various measures and methods In 1992, the United States Commission COSO internal accounting control system to have a new concept that is an internal accounting control objectives for the achievement of the following categories to provide reasonable assurance of the process: 1, the effect of operations and efficiency, 2, the accuracy of financial reports, 3, compliance with relevant Laws and regulations In 1996, AICPA issued Notice No. 78 audit standards, internal accounting control framework defines the five elements (components: control environment (control environment, risk assessment (risk assessment), control activities (control activities), information and communication (information and communication), control (monitoring).

China <"The Independents Auditing Standards No. IX - internal accounting controls and audit risk>> of the internal accounting control is divided into the control environment, accounting system and controls the three parts of the year 1999 revised <" Accounting Law "> from the legal point of view asked all units must establish a sound system of internal accounting controls .2001 Ministry of Finance issued a <<Internal Accounting Control Standards - Basic Standards (Trial Implementation> "and" <Internal Accounting Control Standards - Monetary Funds (Trial>>, This is to resolve the current relaxation of the internal management of some units and control important initiative weakening.

Internal accounting control system as a corporate self-regulation and the internal mechanism of self-restraint, in a unit in a more important position.

The second part of the status of internal accounting controls

In recent years, despite the development of a more comprehensive system of internal accounting controls, but in many cases, tend to lose its rigidity and its due seriousness. According to the Ministry of Finance Annual Report of the National 100 spot checks in the state-owned enterprises found that most corporate existence of the phenomenon of false accounting. In 100 companies, there are 81 existing assets, the problem is not real, false statement of assets, a total of 3,761 million, 83 companies there is no real problem of equity of the owner pseudocolumn interest 2.612 billion yuan, 89 enterprises false profit and loss issues there were false statement of profits of 2.747 billion yuan. Thus, many individuals and units are units in order to meet the desires and interests of small groups, wantonly to accounting fraud. One of the reasons for this phenomenon is the existence of internal accounting controls inherent to ignore the limitations of the implementation process so that the inevitable difficulties encountered.

The third part of the limitations of internal accounting controls

Limitations of internal accounting control system can look at several aspects of understanding.

1, the restrictions cost-effective
Usually presents the principle of cost-effectiveness of rational economic man always cost less to get more benefits, generally considered the principle of universality of economic activities and constraints, it also applies to the enterprise's internal accounting controls . cost-effective implementation of internal accounting controls required to spend in the cost and the resulting economic benefits to maintain the appropriate ratio between, when enterprises to adopt an internal accounting controls, ensure the implementation of this control must be caused by increased costs less than the increase in their benefits. In other words, the implementation of internal accounting controls should not exceed the cost it takes to get the benefits therefrom, or the control measures should be discarded.

An internal accounting control system is able to effectively run a certain extent, depends on its operating costs. Internal accounting control is carried out in accordance with certain procedures, but must pay for these procedures, the occurrence of cost. To the general case that internal more accounting controls, the effect is more obvious. too simple operation and management of internal accounting control process will fLaws to achieve their results. But in the internal accounting control, increased if the control link, then the set positions were bound to increase, such as setting control link, set posts and so on. This requires more staff with internal accounting controls to monitor the implementation, but also need to use better techniques. Therefore, the operation of internal accounting control system costs will inevitably increase. and business operators in order to achieve higher efficiency, are most likely to cancel some aspect of internal accounting controls, to reduce resource consumption, and some smaller businesses, the number of employees have their own very limited, even more unlikely every aspect of internal accounting controls are set to staff. In this way, internal accounting control system will not fully play its role.


2, the exception to the role of business lost
Business is changing all the time in a market, but its system of internal accounting controls are generally to have occurred, repeated the business of design, which also make it unusual or not expected to "exceptional "type of business lost control.

However, in a market economy, the units of the external environment is constantly changing. Units in order to survive and develop, is bound to continue to adjust business strategy, or acquisition of other units, or to open branches in the field, or additional divisions, departments, production lines and so on. In this way, the original control program will lead to increased economic activities of the new can not be completely effective, failed to improve the existing system of internal accounting controls, there may have errors and missed opportunities, bringing losses to the unit.

Internal point of view from the unit, even if the external environment does not change, can also cause similar problems. For example, the unit achieved after computerized accounting, accounting methods and means a fundamental change in the position of internal accounting controls, part of the program so different from the hand-made accounting requirements. In this case, if you do not create a new control system, the original control system, there is likely to fail, thus affecting the effectiveness of internal accounting controls.


3, the implementation of internal accounting controls to bring the limitations of the quality of personnel
First, the internal accounting control system by the collusion constraints. The establishment of internal accounting control system is the theoretical basis: two or more persons or departments the opportunity to make the same mistakes less likely, two or more persons conscious of the partners or department the possibility of fraud is much lower than a single person or a department of the possibility of fraud. the separation of incompatible duties a person can indeed separate in order to avoid irregularities and acts of concealment to provide basic guarantees However, it does not completely prevent two or more people and departments cheating behavior. For example, the common cheating cashier and accounting, property, custody of persons and property check fraud partnership, joint purchasing and accounting fraud, the audit department partner with the accounting fraud and so on. see, then complete, and then close the internal accounting controls can not play its due role. reposted elsewhere in the Research Papers Download http://www.hi138.com Second, the internal accounting control is also limited by human error. internal accounting control system is designed and established by the people, the key role lies in the implementation of the actual operation of the level. any "perfect" internal accounting control system, owing to the designer experience and knowledge constraints fLawed. Meanwhile, executives at the psychological and behavioral system of internal accounting controls can not achieve the basic requirements, there carelessness, inattention, misjudgment and misunderstanding of instructions, etc., may also cause paralysis of the internal accounting control system . For example, did not ask for shipment bill of lading, the total amount of each invoice calculation errors and undetected, the issue is not to review their use of checks, etc., will cause the internal accounting control system failure.


4, top management due to the limitations of abuse of power
If the internal management of the exercise of control functions can not properly perform their functions, and abuse of power, deliberate malpractice, even if well-designed internal accounting controls, and will not play its due performance.

In general, top management behavior of ultra vires exercise of the functions greatly limits the role of internal accounting control system to play. Units of senior management at the unit's core management and decision-making layer, the core of power, in many cases, if they are flat unauthorized intervention in economic activities will inevitably lead to the failure of some control procedures. This is because once the unit's senior management staff of ultra vires, any control program can not restrict their behavior when they try to fraud, intentional misstatements or conceal the financial condition and operating results, the internal accounting control process itself is difficult to play a role. Therefore, a unit of internal accounting controls to a large extent by the terms of the management whether the norms and limits the effectiveness of exercise. This is the current unit of economic activity in the internal accounting control system can not effectively play the role of one of the key factors.

The fourth part of the improved preliminary proposal to the internal accounting control

1, to strengthen the critical control points and key links
Internal accounting control to the point. The one hand, management should focus on key people, such as branch offices and the accounting department who is responsible, on the other hand to grasp the key parts, such as the approval process, capital allocation transfer procedures, computer passwords, etc., but also should pay attention to the management of the key objects, such as important invoices, bank notes, stamps, etc., in addition to also control the key jobs such as cash, bank cashier, income issues and approval of certificates, physical and other responsible persons. Doing so, the limited assets can play a greater role, achieve a multiplier effect.


2, to enhance the management of human resources
First, we want to vocational education, accounting staff, accounting staff enhanced self-restraint, and consciously implement the laws and regulations, compliance with financial discipline. Second, to strengthen the accounting staff continuing education, with special emphasis on those poor business accounting staff knowledge of basic business training to enhance their ability to work to reduce technical errors accounting business processing. In addition, the establishment of good human resource management mechanism, enhance the company on employment, training, benefits, performance appraisal and promotion policies and procedures reasonably .


3, to play the role of internal audit
To play a better role of internal audit, internal audit organizations need to be repositioned. One of the more important point is that the internal auditors from the accounting and finance staff in the isolated, directly to the Board, so that internal audit can play The role of staff, supervision and protection of corporate assets, property safety, supervision and enterprises toward a reasonable, lawful positive direction. For large enterprises can also be set up under the Audit Board of Supervisors, setting should be higher than other sectors to enhance their independence and authority of the Board of Supervisors to accept the business guidance, and the Supervisory Board, responsible for the organization of this double benefit into full play the role of internal audit. Meanwhile, their functions should also be troubleshooting a variety of measures oriented to the management service type. audit checks on economic activity, but also from the traditional to the service against the wrong shift from internal inspection and supervision of internal accounting control to the prediction based assessment, analysis, assessment changes. such as the thermal power plant in Yichun City, the characteristics of the various departments to business Progressive establishment of the main line of advance monitoring. in the business line, establishing a "defense" as the main line to monitor the whole process of defense, in the accounting department on the basis of conventional accounts of the various positions, the business daily and periodic inspection, to establish a "blocking" the monitoring of the main line of defense, through internal audit, the outgoing audit, implementation of the report, discipline inspection, special audits and other means to establish a "check" the main defense line monitoring, real play of the internal audit the role of internal accounting controls to implement. reposted elsewhere in the Research Papers Download http://www.hi138.com