Since the productive forces began their development and with it production, it became increasingly necessary to control the different processes that are developed in the productive cycle of a company as well as the resources that it handles, both materials, financial and other very important and that in recent times is defined as the main resource of an organization represented by human resources, it is thus that a series of provisions is needed that in harmony with the main accounting and administrative regulations contribute to the development of companies in Cuba has different norms in this regard.
Since the National Verifications of Internal Control, carried out since 1999, jointly by the ANEC, the MFP and the incorporation when the Ministry of Audit and Control was constituted, the issue gained momentum. Given the need for a single definition of Internal Control, shared by the controlled and controllers, the task of deeply analyzing the guidelines established in the COSO Report is outlined and through Resolution No. 297/2003 of the MFP, the Committee of Cuban Standards to establish the concept of internal control and the necessary considerations for that purpose.
The Economic Resolution of the V Congress of the Communist Party of Cuba states:
… ¨In the new conditions in which the economy operates, with a greater degree of decentralization and more linked to the demands of international competition, the timely and effective control of economic activity is essential for management at any level… and beyond precise… indispensable condition in all this process of transformation of the business system will be the implementation of strong financial restrictions that make the control of the efficient use of resources be internal to the management mechanism and not depend solely on external verifications ¨….
Government management through the Ministries of Finance and Prices and Audit and Control, together with other State Bodies, has developed a constant and sustained work to consolidate Internal Control. The study of the current situation of this activity recognizes the absence in the country of a common definition of Internal Control that responds to the interests of all parties and facilitates the communication or unification of expectations. Among the measures approved to strengthen this activity, it was agreed to instruct the Cuban Accounting Standards Committee to establish the concept of Internal Control in accordance with the conditions of the Cuban economy for its application in all entities and to be required by the competent authorities.Thus arises Resolution No. 297/03 of the Ministry of Finance and Prices issued on September 23, 2003, which states that the general characteristics of Internal Control are:
• It is a process, that is, a means to an end and not an end in itself.
• It is carried out by people at all levels and it is not just about organization manuals and procedures.
• In each area of the organization, the person in charge of directing it is responsible for Internal Control in accordance with the established levels of authority. All employees of the entity participate in their compliance, regardless of their occupational category.
• It must facilitate the achievement of objectives in one or more of the areas or operations in the company.
• Provides a reasonable degree of security in relation to the achievement of the objectives set.
• Must tend to achieve self-control, leadership and strengthening the authority and responsibility of work groups.
It is clear that Internal Control is nothing more than a process carried out by the Board of Directors, the Management and other members of the Entity with the aim of providing a reasonable degree of confidence in the achievement of the following objectives:
• Reliability of the information.
• Compliance with laws, established regulations.
• Control of resources, of all kinds, available to the Entity.
Internal Control aims to:
• Increase the probability of achieving the objectives.
• Reduce or prevent risks.
• Reduce surprises in the processes.
• Ensure the credibility of the information.
• Comply with laws and regulations.
• To be accountable.
The present investigation developed in the Department of Accounting Sciences of the Faculty of Economic and Business Sciences of the University of Cienfuegos, aims to: assess and develop the internal control system of the Department already mentioned by following the steps described below:
• Consultation on the existing bibliography on the subject.
• Make a diagnosis of the department
• Propose actions for each of the components that improve the internal control system.
The Department of Accounting Sciences has as mission: To train and improve integral professionals and managers, develop scientific activity in the field of accounting sciences, framed in the principles of our society, to contribute to the development of the territory and the country in correspondence with the programs of the revolution. It is guided by the following values:
• Solidarity
• Professionalism
• Respect
• Setting
• Adaptability
Derivation of values
The vision of the department is given by the leading Department in Accounting Sciences in the territory that:
1. Contributes to the development of accounting sciences in the territory.
2. It stands out for its revolutionary commitment.
3. The professionals that it forms are characterized by their integrity, unconditionality, creativity, revolutionary commitment and competitiveness.
4. High scientific pedagogical level of the cloister.
5. Has the necessary human resources.
6. Computerization provides an adequate response to the needs demanded by undergraduate and graduate degrees, and science and technology promote cultural and comprehensive training.
7. Science and research are developed rigorously in a stable and competitive manner.
8. An adequate balance is achieved between postgraduate training and academic training.
9. Professional improvement has a high level of effectiveness.
10. A level of inter-institutional relations is reached abroad for the search for funding for academic scientific activity and as sources of funding.
Department diagnosis
Strengths
1. Committed Human Resources.
2. Territorial leadership in various disciplines of the accounting-financial profile.
3. Ability to respond to requests for services from the technology transfer office.
4. Reserve quarry of management boards in the territory.
Weaknesses
1. Young staff with little experience, in the qualification process.
2. Insufficient human, material, financial resources and infrastructure.
3. Insufficient culture in the management of national and international projects.
4. Insufficient results in attracting foreign currency.
5. Difficulty in individual and institutional management for publications at the national and international level.
6. Insufficient stimulation and social recognition.
7. Lack of information resources and bibliography.
8. Instability and inexperience in the direction of the department.
Opportunities
1. Support from the PCC and the Government to the programs of the Revolution and Business Improvement.
2. National and International Liaison through information and communication networks.
3. Requirement of homologation, accreditation of careers and professionals and universalization.
4. Increase in the number of companies that are inserted in the Business Improvement Process.
5. Increase in the need for management audits in the territory.
Threats
1. Complex international and national scenario due to the effect of the economic crisis and the high demands on the training process and competitive distinction.
2. Reduction of financing with central state funds.
3. Encouragement of labor fluctuation.
4. Scientific-technical development increases the demands for the existence, renewal and expansion of the technological base.
5. Increase in centralized decision-making in the allocation of resources.
6. Inertia of the Higher Education System in the face of paradigmatic changes.
7. Increase in organizations that offer the same scientific - technical services to companies.
8. Minimum possibilities of participation in national and international events.
9. Overload of programs including provision of services.
Development
In the development of the work we will evaluate the elements that make up each of the components of resolution 297 and that as we have said and we will see with the development of the investigation, although they are listed and seen as 5 components, we must not neglect the concept that refers to An Internal Control System, that is, if we analyze each of the concepts, we first have a System: a set of elements that make up a whole and that it is impossible to evaluate it in a non-integrated way, Control: review of all economic, financial, of management and administrative of an entity, Internal: by whom by the own group of workers it is not something that only falls to the administration of the entity.
Component # 1 Control environment
The control environment is the basis for the design of the internal control system, it is the one that reflects the importance or not that management gives to internal control, and the efficiency of this attitude on the activities of the entity. It is illogical to think that if the managers of the organization do not assume the internal control as of first level of importance, the workers do it.
There are established standards for the creation and evaluation of this component, the content of which is explained below.
The environment or control environment constitutes the scaffolding for the development of actions and reflects the attitude assumed by senior management in relation to the importance of internal control and its impact on the entity's activities and results, so they must bear in mind all the provisions, policies and regulations that are considered necessary for its successful implementation and development.
The control environment sets the tone of the organization by influencing the conscience of the staff. This can be seen as the basis for the other components of internal control. Although they should not be evaluated independently but as a whole or as a system.
The department has human resources who know the provisions on the work to be carried out of each of these, for example: teaching and disciplinary regulations, the methodological guidelines of the faculty and the center, priorities of the MES, etc.
Component # 2 Risk Assessment
Once the control environment has been created, it is in a position to carry out a risk assessment. But since something that has not previously been identified can be evaluated, the risk identification process must begin in parallel with the establishment of the control environment and design of the necessary communication and information channels throughout the entity.
Due to the fact that economic, industrial, regulatory and operational conditions change continuously, mechanisms are necessary to identify and minimize specific risks and evaluate risks prior to the establishment of objectives at each level of the organization.
Resolution 297/03 in its annex # 1 states:
“Internal control has been designed essentially to limit the risks that affect the activities of the entities through the investigation and analysis of the relevant risks and the point to which the current control neutralizes them, the vulnerability of the system. To do this, a practical knowledge of the entity and its components must be acquired as a way to identify weaknesses, focusing on the risks of both the internal and external entity and the activity.
Therefore, it is essential to establish the global objectives of the entity, and the strategies for their achievement.
The strategies assumed must be in full correspondence with the objectives set by the entity, thereby seeking a quantitative result (the efficiency of its implementation) and a qualitative result (making an assessment of the effectiveness from the point of view of the results, which achieved and where the benefit goes.). The acquisition, distribution and (or redistribution of material, financial and even human resources, are in correspondence with the strategies followed to achieve the fulfillment of the objectives in the most effective way possible. Each of the activities that are planned and developed in the different areas are in full correspondence with their specific objectives, avoiding above all that efforts are diverted to others and change the meaning of the areas and the entity.Specific objectives must be open in all areas, thereby achieving control of material and financial resources with the same intensity and need.
The risks in the department are not well defined, so it is necessary to carry out a study for a correct identification of the risks that threaten the fulfillment of the objectives and thus implement actions that promote the proper functioning of the department.
Component # 3 Control activities
After the risks have been identified and evaluated, control activities may be established in order to minimize the probability of occurrence and the negative effect that, for the organization's objectives, it would have if it occurred.
Each control activity must be monitored with effective supervision instruments (observations, questionnaires, surprise reviews, etc.) carried out permanently by managers and internal auditors, if they exist, in order to ensure that internal control works properly. and detect in a timely manner how effective the control activity is, in order to be replaced by another.
It is at that moment when the nature of internal control with its prevention and self-control approaches is most clearly observed, where the organization will be able to identify its vulnerabilities and eradicate them with opportunity. Of course, the monitoring activity can be carried out by third parties (external auditors, higher body, etc.), but it will always be less effective for the interests of the entity.
Although some types of control activities are related only to a specific area, they often affect several areas, since a certain control activity can help achieve objectives of the entity that correspond to other areas. In this way, control activities in the operations area also contribute to the achievement of timely and quality financial information, controls over the reliability of financial information can contribute to compliance with applicable legislation, and thus the system fosters a integrated performance. An example of this is the creation of the Procedures Manual.
Control activities are procedures that help ensure that management policies are carried out, and must be related to the risks that management has identified and assumes.
The control activities are carried out at all levels of the organization and at each of the management stages, starting from the preparation of a risk map, knowing the risks, the controls are established to avoid or minimize them.
In many cases, control activities designed for one objective tend to help others as well: operational activities can contribute to those related to the reliability of financial information, these to regulatory compliance and so on.
The objectives of the department are outlined below, the risks that may prevent compliance with these and the points where the main actions should be focused.
| goals | Risks | Points to focus actions |
| Deepening of inter-institutional relations in the territory, in the MES system, with the (OACE) and their national agencies, as well as with foreign institutions | Non-compliance with the improvement plans for teachers and for companies in the territory.
Competition between institutions that provide similar services such as MAC, CANEC. |
Keep updated the survey of the needs of links with the institutions of the territory, nation and abroad.
Prepare and sign collaboration agreements with the institutions of the territory, nation and abroad, according to the previous survey. Require the linking of teachers to concerted projects. Prepare and comply with the categorization plan in the concerted teaching units. Train department teachers in the preparation and management of financed projects. Detect the potential sources of financing for projects for the development of academic activity existing in the environment. Have identified the main key areas and the projection of solutions from project management. Frequently audit and check the execution of financed projects. |
| Achieve suitable human resources that contribute to the successful fulfillment of the mission and consolidate the strategy for training and development of personnel. | Low level in the categorization of teachers from both the headquarters and the CUM.
Fluctuation of human resources due to economic improvements towards other organizations. |
Manage scientific sessions adjusted to the topics requested by the doctoral student.
Release full-time doctoral students who demonstrate that they are in the development phase close to completion. Promote the transmission of scientific experience achieved by doctors of science from other departments. Prioritize the financing of the doctoral student's participation in scientific events related to their research topic, as well as managing publications in referenced journals. Identification of the needs for improvement of teachers. Manage the necessary courses and postgraduate degrees, whether in Cuba or abroad. Conduct biannual surveys to undergraduate and graduate students on comprehensive teacher training |
| Achieve a high level in the comprehensive training of students in regular courses, with an emphasis on the formation of values. | Deformations in behavior carried over from previous teachings.
Resistance to change. Deformed study habits, as well as the conception of this. Diverse and complex family environments which require differentiated treatment. Limitations with human resources in terms of quantity and quality. Demotivation for the race. |
Preparation of general indications for educational work and ideological political work.
Conduct surveys at the end of the semester to measure student satisfaction in: · Comprehensive professional training. · Educational work of teachers. · Development and execution of educational projects. · Satisfaction with work practice. · Bibliographic assurance. The groups of years and the Heads of the research lines guarantee the systematic result of the work in the student scientific groups. Agreements are signed with teaching Units and Base Labor Entities. |
| Strengthen the work of University Extension, as a process integrated into the educational, political and ideological work. | Limitation of resources for the development of both material and human (responsible) activities.
Excess of tasks on the head of the year group as the maximum coordinator of all the activities of the brigade. |
The groups of years control the participation of the students in the military patriotic acts, in the BET and other activities summoned by the political organisms and the Institution. |
| Guarantee the security and protection of the assets and resources that we have. | Lack of constructive security in some premises.
Breach of the student worker guard. |
The groups of years control compliance with the resolution that regulates the student guard.
Carry out the established controls of the area's fixed assets. Keep the responsibility of the workers updated with the means in use. |
| Guarantee with quality the continuity of study in accounting for students enrolled in the CUM | Low level of preparation in the sources of income.
Limitations with human resources in terms of quantity and quality. Low social and economic recognition for professionals in this specialty. |
Participation of the professors who work in the continuity of studies in postgraduate courses that update them from the technical and pedagogical point of view. |
| Promote and consolidate science and technology activity with an adequate organization that prioritizes the department's strategic lines of research. | Limitation with human resources (quantity).
Absence of professors with scientific category (only one doctor linked to the department). Overload of homework with young teachers and with the rest of them. |
Use the scientific policy of the department as a working instrument.
Design and execute a program of corrective measures for non-compliance in the achievement of the science organization. Motivate teachers to scientific research. Create at least one student scientific group per line of research. Stimulate the scientific-student work of teachers. |
| Increase the number of workstations and computer applications for use by our teachers and students. | Limitations with the infrastructure.
Insufficient computer resources. Bad state of the existing computer resources. |
Survey the possible national and foreign sources of financing for IT infrastructure projects. |
Component # 4 Information and communication
It is necessary to identify, collect and communicate pertinent information in a form and term that allow each worker with their responsibilities. Computer systems produce reports that contain operational and financial information and data on compliance with regulations that allow the entity to be properly managed and controlled. These systems not only handle internally generated data, but also information on external events, activities and conditions relevant to management decision-making, axially as well as for reporting to third parties.
There must also be effective communication in a broader sense, flowing in all directions through all areas of the organization, from top to bottom and vice versa. The message from top management to all staff must be clear: "Control responsibilities must be taken seriously." Workers have to understand what their role is in the internal control system and how individual activities are related to the work of others. On the other hand, they must have means of communicating meaningful information to higher levels. Likewise, there must be effective communication with third parties; as clients, suppliers, control bodies etc.
Relevant information must be captured, processed and transmitted in such a way that it reaches all sectors in a timely manner, allowing individual responsibilities to be assumed. Communication is inherent in information systems. People must know in time the issues related to their responsibility for management and control. Each function must be clearly specified, understanding as such the issues related to the responsibility of individuals within the Internal Control System.
Reports must be adequately transmitted through effective communication, including a multidirectional circulation of information such as:
- Ascending: that they have an obligation to reach the corresponding management levels, not only with the objective of their approval, but also of knowledge and decision-making as a consequence thereof Descending: that the interiorities of the same are known until the lower level of the entity that has to do with information, in order to achieve its due primary support and due feedback on the problem.
Transversal: that achieves the need to address in a way that is not straight, seeking cross-feedback, and thereby achieve different interpretations and analysis of the problem.
The existence of open lines of communication and a clear willingness to listen on the part of managers are vital. All this taking into account the need not only to understand the problem, but also to seek the most collegiate and appropriate solutions.
In addition to good internal communication, effective external communication is important that favors the flow of all the necessary information, in both cases, it is important to have effective means, such as policy manuals, reports, institutional dissemination, formal and informal channels, attitude assumed by management in dealing with its collaborators.
Component # 5 Supervision and monitoring
Permanent monitoring activities include supervision activities carried out constantly, directly by the different management structures, or through a team of internal auditors, such as the Control Committee itself, which must carry out its functions to prevent events that generate losses. or incidents costly to the entity from a financial and human point of view.
Separate or individual evaluations are monitoring activities that are performed on a non-routine basis, such as audits by internal auditors.
The objective of this standard is to ensure that internal control functions properly, through two types of supervision: continuous activities or specific evaluations.
It is the process that evaluates the quality of internal control over time. It is important to monitor internal control to determine if it is operating as expected and if modifications are necessary.
Permanent monitoring activities include supervision activities carried out permanently, directly by the various management structures.
Separate evaluations are monitoring activities that are performed on a non-routine basis, such as periodic audits by internal auditors.
Some of the issues to consider are:
Constitution of the control committee, made up of at least one top-level leader and the internal auditor. Its objective would be to monitor the proper functioning of the Internal Control System and its continuous improvement.
In the organizations that justify it, the existence of internal audit units with a sufficient degree of independence and professional qualification.
The objective is to ensure that internal control works properly, through two supervision modalities: continuous activities or specific evaluations.
The former are those incorporated into normal or recurring activities that, running in real time and rooted in management, generate dynamic responses to surviving circumstances.
Regarding specific evaluations, the following considerations apply:
Their scope and frequency are determined by the nature and importance of the changes and risks they entail, the competence and experience of those who control them, and the results of ongoing supervision.
They are executed by those in charge of the management areas, of the internal audit included in the planning or specially requested by the management and the external auditors.
They constitute a whole process within which, although the approaches and techniques vary, an appropriate discipline and unavoidable principles prevail. The task of the evaluator is to find out the real operation of the system: that the controls exist, are formalized, that they are applied daily as a routine incorporated into the habits and that they are suitable for the purposes pursued.
The level of documentation of the controls varies according to the size and complexity of the entity. There are informal controls that, even if they are not documented, are applied correctly and are effective, although an adequate level of documentation usually increases the efficiency of the evaluation and is more useful by promoting the understanding of the system by the employees. The nature and level of documentation requires greater rigor when it is necessary to demonstrate the strength of the system to third parties.
If we assess the situation of this component, we see that all the processes in the department are supervised through their execution, which, since the risks are not well defined, the monitoring actions are not always in correspondence with the action to eradicate or minimize them
Relationship between Resolution 297/03, Decree Law 187/98 and ISO9000 standards.
Systems integrator table
| Resolution 297/03
Components and standards |
Decree Law 187/98
16 Subsystems |
ISO9000 standards
8 Principles |
| Control environment
Integrity and ethical values. Professional competence. Atmosphere of mutual trust. Organization chart. Assignment of authority and responsibility. Policies and practices in personnel. Control committee |
General organization
Methods and styles of management. Organization and regulation of work. Labor and salary policy. Attention to the man. |
Leadership
Staff participation. |
| Risks evaluation
Standards for risk assessment. Risk identification. Risk estimation. Determination of control objectives. Change detection |
Organization of the production of goods and services.
Quality management. Economic contracting. Financial relationship system. Marketing. |
Customer focus.
Process-based approach. Mutual relations beneficial with the supplier. |
| Control activities
Separation of tasks and responsibilities. Coordination between areas. Documentation. Defined levels of authorization. Timely and adequate record of transactions and events. Restricted access to resources, assets and records. Rotation of staff in key tasks. Control of the information system. Information technology control. Indicators of performance. Independent internal audit function. |
Planning
Accounting Internal control Costs Prices |
Systems approach to management. |
| Information and communication
Information and responsibility. Information content and flow. Quality of the information. Flexibility to change. The information system. Management commitment. Communication, organizational values and strategies. Communication channels. |
Information System. | Fact-based approach to decision making. |
| Supervision and Monitoring.
Evaluation of the internal control system. Effectiveness of the internal control system. Audits of the internal control system. Validation of the assumed assumptions. Treatment of detected deficiencies. |
All subsystems must be supervised | Continual improvement. |
Conclusions
1- The department has an internal control system that does not define all the risks and therefore the control activities are not efficient.
2- The main objectives of the department are defined, the risks that threaten compliance with them and the actions to minimize them and thus efficiently fulfill the objectives.
3- With the reoriented objectives and the new definition of risks, the department is in a position to maintain an internal control system adapted to current needs and with the possibility of adapting to changes in the environment.
recommendations
1- Present the redesigned objectives to the group of workers as well as the risks that may affect their fulfillment in order to:
• Communicate the goals of the department.
• Motivate the group to achieve these goals.
• Find or define other unforeseen risks.
• Undertake the necessary actions for the fulfillment and control of the objectives.
2- Continue the permanent review and update of the internal control system to redefine objectives if necessary according to the new priorities of the MES and the center.
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