The purpose of organisational control

Terminology

System – a group of independent but interrelated elements comprising a unified whole or a process for obtaining an objective

Policy – a guiding principle

Procedure – a series of acts or a set sequence of steps

Guideline – a recommended approach for conducting a task

Advantages of having a formal procedure

· the same way of record

· adopting of a ‘best’ practice

· it is easier to train staff, to audit and to identify errors

Designing financial procedures

You need to consider:

Procedure manual

· consolidation of the formal procedures within each system

· contain sufficient details, flowchart of each system, detailed narrative notes

· should be very specific

2.1 The purchasing cycle 2.2 The sales cycle

The inventory system

The wages cycle

The cash system

Automated systems

Features:

· Uniform processing of transactions

· Lack of segregation of functions

· Potential for data to be corrupted easily

· Potential for increased management supervision

A comparison of manual automated systems

Manual systems	Automated systems
+ Low capital cost	- High capital cost
+ No computer experience required	- Training cost
+ Easy to correct errors	- Less easy to correct errors
+ Ledgers are portable	- Systems can crash
+ Can review transactions for logical sense while calculating	+ Easier to sort and analyse data
- Slower at performing calculations	+Quicker
- More likely to make calculation errors	+ Fewer errors
- Analysis of information is more time-consuming	+ Can perform more complex calculations
- Less easy to audit	+ More security (passwords)

The purpose of organisational control

Purpose	Why this is important
Safeguard company’s assets	If assets are stolen or damaged the company will have to spend money to replace them
Efficiency	Inefficient business practices are a waste of the company’s money
Prevent fraud	Fraud means the loss of valuable resources belonging to the company/shareholders
Prevent errors	Errors can lead to losses in efficiency (time spent correcting) or a loss of assets (e.g. paying for goods which have not been received)

Дата добавления: 2015-10-26