The deficiencies present in the Internal Control System constitute one of the problems that has focused the attention of managers and officials, who are projected towards the implementation of a new work philosophy that guides the development of business activity towards higher levels of organization.
evaluation-for-an-internal-control-systemIn this sense, this worrying gave rise to the present investigation, which is projected from the implementation of internal control towards the possibilities of its continuous improvement, relying on self-evaluation and evaluation of the established system.
Therefore, it was proposed as an objective the elaboration of a Procedure for the evaluation and self-evaluation of the Internal Control System applicable to the conditions of the CIMEX Corporation in the Taguasco Yaguajay Complex of the Province of Sancti Spíritus, which has as a novelty the establishment of a methodology that holistically promotes the system of relationships between the different components of internal control that reveals the functional logic of the organization.
In the foundation of the procedure, in the diagnosis of the current situation of the entity, as well as in the preparation of the proposal and its validation, methods, techniques and instruments have been applied that have led the results to consider it as a way that allows to improve the conditions present continuously, endorsing its relevance and impact among the managers of the different processes that take place in it, constituting its practical significance.
Introduction
The current Cuban company is going through a process of improvement demanded by the need to establish a work philosophy that contributes to achieving greater results depending on the specific conditions it has and adjusting the structural and functional systems of the various activities towards compliance of state policies and for the achievement of the aims to which it aspires.
These changes cannot take place in isolation, or focus on a specific activity, due to the degree of importance it has within the entity's environment. The transformation must be conceived in an integrated way making use of the various resources available and in accordance with the internal and external conditions that provide potential and guarantee the operational achievement of all the processes through which it passes.
It is necessary to establish a system that contains all the scaffolding that supports the structural development and the functional dynamics of the operations, in a coherent way. For this, it is necessary to establish the measures that serve as the basis for the business project, and from there to enforce the rules, principles and policies established in the current regulations.
The organization of this process is complex in itself, seen from the various dimensions it acquires and from the approaches that can be assumed. The problem is not in the study of its parts, but in the totalizing conception of itself, which establishes a changing and dynamic nature of each of the elements that constitute it to obtain as a significant feature, higher-order qualities in its configuration.
The systemic nature of this process lies in the study, analysis, understanding and modification of the behavior of the object as a system and not its comprehensive interpretation. (Báez OJ, et al. 2006).
That is, seen as a whole, from the inside out, possessing an internal structure that is developed by part, and each one has a specific function, integrating with the other, providing new properties to the object that allow to regulate and transform them automatically..
One of the dimensions of this process that we are referring to is control. Seen by many authors, as the most important process of business activity. It measures the link that must exist between the various operations of the system, isolates the possibilities of risks that are generated and guarantees stability and the achievement of objectives.
Control has been widely approached for its different manifestations in science. In the case at hand, it acquires various limits, which are not exempt from new forms of interpretations.
Control is nothing more than a mechanism to know if things are going as they should and allow, if not, to take some measures to achieve it. (…). If we conceive of management as a process composed of elements that combine and need each other reciprocally, it is indisputable that control is one of them. (Báez OJ, et al. 2006. pp. 4).
According to this foundation, control must be merged into the environment of the company to counteract the dissimilar manifestations that concur and express itself towards the achievement of results. Control must be given as a system, flowing as a tool in the hands of management to direct the internal processes of the company and guaranteeing a new dimension where deficiencies are identified and contributes to continuous improvement, evaluation.
Does the management have an Internal Control System (ICS) as a work philosophy? This could be the first question in the narrow path of this investigation. How to achieve greater results? Is the entity in a position to design an ICS? How to evaluate the results of the SCI? There would be many questions in this regard and they find clarity in the study of the manifestations that occur in the context of business activity.
In this sense, what are the manifestations that occur around this uncertainty?
In the first place, managers have not become aware of the importance and need for an internal control system that allows establishing control mechanisms over the development of their company's activities. This has influenced in conceiving this process as an end and not as a means to achieve the end.
And secondly, the expression of internal control has remained within the narrow framework of the preparation of the Policies, Organization and Procedures Manuals, moving away from its aspirations, and positions based on the periodic evaluation of the system.
Consequently, this conception must be fought to avoid the establishment of harmful conventions. In this case, the present investigation studies as a scientific problem the insufficiencies present in the improvement of the Internal Control System of the Taguasco Yaguajay Complex of the CIMEX SA Corporation.
The object of investigation is the internal control of the Taguasco Yaguajay Complex of the Corporación CIMEX SA.
The general objective is based on the elaboration of a procedure for the continuous evaluation of the Internal Control System that is evident in the different activities of the Taguasco Yaguajay Complex of the Corporación CIMEX SA.
In accordance with the objective, the field of action is the evaluation of the Internal Control System of the Taguasco Yaguajay Complex of the CIMEX SA Corporation.
The hypothesis of the present study supposes the elaboration of a procedure that allows in a continuous and permanent way the self-evaluation of the Internal Control System of the Taguasco Yaguajay Complex of Corporación CIMEX SA.
The problem raised is manifested in all the establishments belonging to Corporación CIMEX SA, Sancti Spíritus branch, and the Taguasco Yaguajay Complex, with domicile in the municipality of Taguasco, of said Corporation, has been taken as a sample, applying an intentional non-probabilistic selection criterion.
There are various methods and techniques applicable to this type of research, where they have been selected from the theoretical level: logical historical, synthetic analytical, inductive deductive, from the abstract to the concrete, systemic. At a mathematical statistical level, descriptive statistics were used that allowed the selection of techniques to choose the sample and the variables to be measured in the research, as well as the detection of those foreign elements that could threaten the reasonableness of the results, in addition to allowing processing of the information obtained during the study. The percentage calculation was also applied to determine evidence and variations originated in the analyzes carried out.
Bivariate tables were used, which allowed to establish logical analyzes to determine the regularities of the information obtained and to be able to process it and reach logical and finished inferences.
For the development of the exploratory study, the survey, the interview, the observation, the document analysis and the expert criteria are used as fundamental quantitative methods; their respective instruments were prepared by the author of the investigation.
According to this methodology, the practical contribution of the study is given by the proposal of a procedure for the self-evaluation of the Internal Control System that allows diagnosing the state of the process of continuous improvement of the Internal Control in the Taguasco Yaguajay Complex of the CIMEX Corporation SA.
The scientific novelty lies in the modeling of the procedure that allows the self-evaluation of the Internal Control System according to the characteristics of the entity and on the basis of the principles of implementation to establish continuous improvement measures throughout the system in a systemic and totalizing reasonably reflecting present reality.
Development.
It would be complex to think about how to carry out the evaluation of the internal control system (ICS) of an entity that allows to enhance the process of improving it, in order to achieve the efficiency of the operations that are generated and the discipline of its workers.
In this sense, new and dissimilar questions could arise such as: What is the SCI? Where does it occur? How is it conceived? What is its structure? How is it manifested in the entity?
We should start by defining the SCI. It could be considered as the system that organizes, develops and controls all the processes of an entity in relation to the objectives, policies and work strategies carried out for the performance of the same. In this sense, it would become a work tool, supported by the management philosophy put into practice and which constitutes the support for the successful operation of the organization.
The internal control system is not easily designed. It is necessary to consider all the variables that affect the processes and operations carried out in an entity. They must be dimensioned from:
- Implementation. Evaluation. Continuous improvement.
To structure the SCI, it is necessary to integrate the concept of Internal Control from its five components to the functional structure of the entity. The conception of internal control is based on its systemic nature, where the functional logic of its components is followed, which are dynamized in the relationships established between them and compliance with the standards that support it, establishing themselves as regularities:
- The relationship between the components of internal control determines its functional structure in correspondence with the operation of the different processes that are developed in the entity. Compliance with the standards of each of the components allows determining the deficiencies that arise in the operation of the entity's internal processes and the commitment of the management and the rest of the staff in the development of their activity.
In this complex process, the conditions presented by the entity play a decisive role. The characteristics that identify it and make it different from its counterparts. The operational, functional and organizational structure of each of its processes and activities that are combined with the results and their quality. The institutional values and the social and moral commitment of the human resources that are developed in it. The relevance of its processes, the social impact and the optimization of the resources with which it operates. All this determines that the entity acquires a unique personality and therefore its structuring, organization, functionality and evaluation of each of the processes that it develops, acquire particular qualities, which require from the work mechanism, meaning and specific sense that differentiate it from the rest.
These features that typify the processes that occur in an entity, strongly influenced by environmental conditions, determine that the entity's structure is a dialectical opposite of the internal control structure. This shows that to solve such contradiction it is necessary to design an internal control system that is based on the systemic nature of the internal control components and on the holistic nature of the processes that are developed in the entity. As a synthesis of these relationships, the internal control system is obtained that solves the aforementioned contradiction.
To achieve that the SCI is designed in harmony with the entity's conditions, it is necessary to initially carry out an implementation process, which is illustrated in the following diagram, expressing the fundamental dialectical contradiction.
In this way, the SCI is designed, based on the implementation of the same according to the characteristics of the entity under study, and for this it is necessary to follow a set of stages to be fulfilled. They are:
- Training Diagnosis Design and implementation Continuity
As can be seen, the process requires a phase of continuity or follow-up that allows the system to be constantly revitalized, so the aforementioned stages acquire different dimensions in this process. In order to achieve continuity, it is necessary to establish a process of continuous evaluation of the system that improves it according to the deficiencies that are detected and the activities that are proposed for their improvement.
This improvement process is based on the Supervision and Monitoring component, which allows determining the deficiencies that arise in the operation of the SCI, decision-making and continuous improvements that lead to the solution of the problems detected.. From this, new regularities are derived, which determine the need for the permanent evaluation of the SCI, as results of new contradictions, less essential, but which make the evaluation more dynamic and allow the sustainability of the SCI.
The process of evaluating the internal control system occurs in a system of relationships that starts from the supervision modalities and that in turn are dialectical opposites and that find a solution in the communication of the results and in the degree of commitment of the management and the rest of the staff in helping to improve the situations presented. This process is expressed in the following figure:
The results that are obtained must be communicated to all the people responsible and involved in the improvement of the SCI to guarantee its improvements and continuity. For this reason, between implementation and evaluation there is a relationship that creates the effectiveness of the improvement process, which gives life and continuity to the SCI.
In this sense, the implementation of the SCI acquires a static position in its initial stage because it manifests a condition present in the entity in a base period that is characterized by being decisive. According to this, the system needs to be activated, achieving its functionality. This dynamic quality is guaranteed by evaluation. Here evaluation and implementation become dialectical opposites. The result of this contradiction is expressed in the effectiveness of the SCI, manifesting its improvement, which gives continuity and timeliness to its purpose, based on the regularities that identify it. The following diagram illustrates the solution of the contradiction:
In summary, this process can be illustrated by its systemic nature and by its holistic nature, such as:
To achieve continuous improvement, which is the process that energizes the ICS, the following stages must be followed according to the implementation model:
- Permanent training Longitudinal diagnosis Proposals for continuous improvement Systematic evaluations Follow-up
In this way the system acquires greater significance for the organization and allows the successful operation of the entity.
In all this process, the most significant feature is the evaluation, which, to be completed, must contain a set of tools and follow an adequate methodology for its development.
The tools must be conceived according to the stages. Therefore, techniques and instruments such as:
- Verification, verification, investigation, corroboration, evaluation, evaluation Questionnaires, interviews, surveys, case studies, field work, working papers.
Methodology for the evaluation of the internal control system.
The proposed methodology aims to organize and implement the SCI evaluation in order to favor the process of continuous improvement. It is the result of investigations that are carried out in the audit discipline of the CUSS, which reveal the existence of an evaluative practice not integrated into the internal action of the processes that occur in the context of the Cuban company; being the same, only conceived as an important part of the internal control checks that are carried out once a year, by registered auditors and the internal control evaluations taken into account in the financial audits that are executed by independent entities.
The application of this methodology in the development and improvement of the SCI will involve a set of actions that favor:
- The construction of an integrative vision of the evaluation (desirable scenarios) that is assumed by the organization as shared values and expectations The reformulation or continuous formulation of the SCI The analysis of the features that characterize the context of the entity and the determination of its own strengths and weaknesses, as well as the opportunities and threats to which it is subject The formulation of an evaluation strategy to achieve the objectives The establishment of the objectives of implementation, evaluation and continuous improvement of the ICS, for those responsible of the different areas and processes, depending on the control and evaluation strategies. Permanent evaluation and feedback of the SCI through the determination of new strategies to achieve the higher objectives.
The implementation of an evaluation process has to do with a certain theoretical-methodological position. In our case, we have opted for the holistic dialectical model, oriented towards decision-making and change. This will involve, operationally, the completion of various stages that could be summarized as follows:
1. Awareness stage.
The main objective of this stage is to sensitize the management and the rest of the workers in the evaluation process, who will be the architects of the change, towards the objectives and need of the evaluation, with prior identification of said needs.
At this stage, the participants are also explained the meaning of the evaluation, reaffirming its meaning, to encourage a change in attitudes, opinions and values.
This stage is materialized through workshops, where all those involved participate actively and creatively, through debate and discussion, as well as the bases of the assessment process are socialized and agreements are reached regarding its development.
2. Stage of planning and organization of the process.
This stage has two essential purposes. On the one hand, determine that there are elements prior to the process that facilitate its success (such as the existence of support from the management, a minimum of human, material and financial resources and a certain degree of motivation, among other aspects) and, on the other, to present in writing the evaluation project that is planned to be carried out, from the presentation of the objectives; the selected variables (unit of analysis); the scope and limits of the study, the methods, instruments and procedures to carry it out, as well as the schedule of activities.
The organization implies establishing the conditions that make the study feasible. It is essential, at this stage, to form work teams, assign tasks based on planned activities and ensure that staff are trained in the tasks they are expected to perform. It is also essential to establish flexible and agile mechanisms for coordination and communication between the work team and the person in charge. In this sense, the Board of Directors, the Control Committee, the internal audit will be directly involved; and the officials and workers of the entity, in a less direct way.
All of the above is specified in the following steps or actions:
- Identification of the most important problems, derived from the key areas or processes and from the recommendations left in previous examinations, for the establishment of the objectives Definition of the evaluation variables Creation of the evaluation team, whose function will be: Define the Basic tasks to be carried out at work Prepare a strategic action plan with the entity Inform and motivate participants about the purpose, objectives, justification and methodology of the evaluation process Actively participate in the deliberations of the work teams.Securing resources and infrastructure to support the evaluation process (information, documentation, instruments for collecting and processing information, work sites, etc.). Prepare corresponding reports.
The evaluation project must be conducted technically and academically by a professional well versed in program evaluation processes related to the verification and examination of internal control. It is her responsibility to monitor and control the tasks and the times foreseen to execute them, to be present in the work sessions of the teams without participating in the discussions, to draw up a synthesis of each session, to integrate and reconcile the conclusions of. the groups.
The performers will take care, simultaneously, of the evaluation of the different variables of the program. It is their responsibility to collect, organize, analyze and assess the pertinent information; prepare partial evaluation reports, participate in integration meetings with other groups and commissions.
- Organization of the work teams Assignment of responsibilities within each team Design of the detailed program of the activities of each team and execution deadlines.
3. Execution stage.
Once the exam has been planned and organized and the conditions under which the different actions will be developed are clear, the next step is execution, which consists of collecting the information and analyzing it, becoming the main objectives. of this stage. It refers to going to the sources provided with the strategies and instruments planned, but paying attention to the aspects, situations, information and opinions that could be relevant for the results.
- Analysis of the variables to be checked. Application, by the evaluating team and the executors, of the indicators and criteria, taking into account the description, analysis and reflection on the basis of the evidence obtained. In this case, the following must be done: collect, organize, analyze and assess pertinent information, prepare partial evaluation reports, Analysis of results and preparation of partial evaluation reports, Synthesis of collected information and conclusions.
Each work team, after collecting, organizing, analyzing and evaluating the pertinent information, after discussion with the team, prepares a partial evaluation report, which will subsequently report to the coordinator of the evaluation commission. Said report must contain:
- analyzed points, arguments, agreements, conclusions, and team recommendations.
The evaluation coordinator, in turn, will prepare an integrative report, the result of the evaluations of each of the teams. Said report must be objective, professional, balanced, concise, clear and direct, without considering the annexes, which account, with data and documented statements, of the key factors in the situation of the center, both of those that have had a greater development or they are consolidated, such as those that require improvement or transformation.
This report must include as a minimum:
- A general introduction, with a brief description of the entity, referring to the characteristics that typify it, and the evaluation process itself. An evaluative analysis from the perspective of the purposes, objective and applied standards, with the corresponding supporting arguments. The conclusions, which incorporate specific recommendations for action and the commitment of its implementation by the members. The annexes must be the most relevant and pertinent, as support for the information included in the report.
It is essential to bear in mind that the evaluation report should not be, in any way, the inevitable fulfillment of an administrative procedure. Nor should it be limited to a list of facts or figures. Its essence consists in transcending the descriptive level through a self-criticism exercise (although always supported by evidence) that culminates with a realistic plan of actions in the short, medium and long term.
The report, including the action plan, must be widely disseminated among the workforce and lead to decision-making regarding the application of continuous improvement strategies, which must be accompanied by a monitoring plan in order to to verify, not only the change that takes place from them, but also their own viability and relevance.
4. Stage of decision making and proposal for continuous improvements.
It corresponds to the execution of specific actions derived from the assessments and recommendations made and specified in an action plan or program. Likewise, in accordance with and approved by the management and with the participation of all staff, develop and apply a system of continuous improvements that allow solving the problems detected in the evaluation of the SCI.
5. Monitoring and control stage.
This phase is established in order to verify compliance with the action plan. It is a dynamic stage, which even makes it possible to rectify the action plan.
In this way, once a detailed evaluation of an aspect has been obtained, improvement actions contained in an explicit programming that will belong to the same stage would be implemented. This will allow, after a period, to evaluate new results with a dynamic that will lead to a better level of the SCI at the end of the evaluation stage.
In this sense, at the end of the evaluation process it will have been possible to:
- Specify the aspects in which the SCI meets or exceeds the minimum standards established in the rules and regulations in force Determine the aspects that do not reach the minimum standards and that therefore must be improved Formulate concrete recommendations on the priority actions to introduce corrective adjustments.
Below is a diagram that illustrates the proposed methodology and that synthesizes the holistic dialectical approach considered in the modeling of the evaluation proposed for the SCI.
At the end of this complex process, the results of the evaluation must be recorded in a report that guarantees management to make decisions regarding the situations that arise and that guarantee the continuous improvements of the SCI, mentioned in phase 3 and detailed below. continuation.
The methodology for the report is proposed:
- Introduction: the heading must appear in the introduction, which contains the name of the entity, date of the evaluation, reference to the documentation that accredits the exam (either from the Control Committee, internal auditors, external evaluators), names and surnames of the evaluators, among others. A brief description of the entity and the internal control system must also be included, as well as its objective, compliance with current regulations and the inconveniences that threaten its development. Development: the most significant results obtained in the examination and determine the irregularities detected, in accordance with the violation of the Internal Control regulations and other regulations relating to the operations system of the examined process.In this section the results that have the greatest impact on the SCI and that support the proposed evaluation will be summarized. An evaluation of the Internal control is proposed. Recommendations: we proceed to propose recommendations that give the possibility of a system of continuous improvements to the SCI. General: the acknowledgments or other aspects that are of interest to be reflected are required. Annexes: the activities or Actions that support the improvements of the SCI proposed by the entity and that will promote in the next evaluation process, take as a reference and validate its effectiveness.Acknowledgments or other aspects that are of interest to be reflected are required. Annexes: activities or actions that support the improvements of the SCI proposed by the entity and that will promote in the next evaluation process, take as a reference and validate its effectiveness, cannot be missed.Acknowledgments or other aspects that are of interest to be reflected are required. Annexes: activities or actions that support the improvements of the SCI proposed by the entity and that will promote in the next evaluation process, take as a reference and validate its effectiveness, cannot be missed.
In this way, a form of evaluation of the internal control system in an entity could be constituted and established that allows achieving the determination of the deficiencies that most affect its operation and the proposal of continuous improvements to enhance its improvement and continuity.
Main results obtained from its application.
- A methodology that allows external auditors to evaluate the SCI and a procedure for continuous self-assessment of the process The involvement of staff in the SCI assessment process from the activities they perform, as well as the awareness of managers and motivation The determination of the main deficiencies that affect the operations carried out by the entities where it is being validated. The determination of the magnitude of the causes and effects of the deficiencies detected and the elaboration of continuous improvements to improve the existing situation. The identification of critical areas and those operations that are subject to unidentified risks The functionality of the supervision and monitoring component, as well as the rapid and efficient action of the Control Committee,internal audit and management of the selected entities.
Conclusions
The SCI constitutes a working tool for the proper functioning of the entity, which must be designed and evaluated for its continuous improvement. In this way it becomes a work philosophy for everyone.
The evaluation of the internal control system not only improves the present situation, but also commits the management and all the workers in the development and improvement of the company's performance in order to achieve greater results with efficiency, effectiveness and equity.
recommendations
Propose its generalization to other entities in the territory that guarantees the continuous process of improvement of the SCI because its application is a necessity.
Continue to improve the functionality of the procedure from a theoretical and practical point of view that contributes to its generalization to other entities, considering the characteristics of the Organization and its flexible nature.
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