Current through Register Vol. 46, No. 39, September 25, 2024
(a)
The general methodology by which management is carried on within an
organization; also, any of the numerous devices for supervising and directing
an operation or operations generally.
(b) Internal control, a management function,
is a basic factor operating in one form or another in the administration of
every organization, business or otherwise. Although sometimes identified with
the administrative organism itself, it is often characterized as the nervous
system that activates overall operating policies and keeps them within
practicable performance ranges. The principles contributing to internal control
are usually these:
(1) recognition that
within every organizational unit there are one or more functional or action
components known as activities, costs, or responsibility centers, or management
units;
(2) delegated operating
authority in each organizational unit permitting freedom of action within
defined limits;
(3) the linking of
expenditures--their incurrence and disposition--with specified individual
authority;
(4) end product planning
by means of (i) a budget fitted to the organizational structure and to its
functional components, thus maintaining dual forward operating disciplines; and
(ii) the adoption of standards of comparison and other performance measurements
such as standard costs, quality controls and timing goals;
(5) an accounting process that provides
organizational and functional administrators with prompt, complete, and
accurate information on operating performance, and comparisons with
predetermined performance standards;
(6) periodic reports, consonant with
accounting and related records, by activity heads to supervisory management;
reports serving as feedbacks of informative pictures of operations, and as
displays of favorable and unfavorable factors that have influenced
performance;
(7) internal check,
built into operating procedures, and providing maximum protection against fraud
and error;
(8) frequent
professional appraisals, through internal audit, of management and its policies
and operations generally, as a protective and constructive management service,
its emphasis varying with the quality of operating policies and their
administration; and
(9) the
construction of the above controls in such a manner as to stimulate and take
full advantage of those natural attributes of individual employees the
recognition and exercise of which may obviate the need for some internal
controls and determine the extent and rigidity of others.
