In the process of financial and economic activity, organizations carry out a lot of operations: production of goods, rendering of services, settlements with suppliers and customers, calculations of taxes and fees, other operations stipulated by activities and legislation. The organization must report on all these operations and their financial results to the regulatory authorities, submit certain reports on time. In addition to reporting to the tax authorities and other authorities, companies must report financial results to their shareholders and founders, partners and even some debtors. Reporting is also required for internal use. For all this, there is internal control, for the convenience of which a card of internal financial control is used. This topic is dedicated to this article. From it it will become known what is internal control, what is the procedure for its implementation, and also why do we need a card of internal financial control, its components, specifics and rules for filling out.
What is internal control?
Internal control in the organization is carried out by the accounting department or by the director himself, if the organization is small and he took on the role of chief accountant. The Federal Law No. 402 of December 6, 2011 regulates the procedure for exercising internal financial control . It is called the Law - "On Accounting". It refers specifically to internal control in article 19. It describes a number of key requirements for accounting, the need for maintaining it for all organizations without exception, as well as sanctions for organizations that do not fulfill these requirements.
What should be internal control
The procedure for exercising internal financial control involves the implementation of several principles. Their observance is important both for internal users in the organization, and for external auditors.
- Credibility. All documentation and reporting should be consistent with the operations performed. All actually completed processes should be reflected, with a real amount and terms.
- Completeness. Documents and reporting should contain all data of importance to stakeholders. Operations should be specified, if necessary, contain explanatory comments.
- Neutrality The documentation and reporting should not indicate the interests of any persons.
- Continuity. The hierarchy of documents and reports, the sequence of reflection of the totals, the cumulative total for the reporting periods. All documents are interconnected.
Implementation paths
All organizations are in different situations. In some, only one person works, who is both the founder, and the director, and the accountant, and the sales and procurement manager all rolled into one. In others, on the contrary, there is a huge staff of people, each of whom is engaged in his own business. In one case, it is more convenient for an organization to conduct its own calculations, in the other, it simply does not have enough personnel for this. Based on this, companies have two possible ways out of the situation, each of which has its pros and cons.
- Independent record keeping. Even in an organization with a single employee, it is possible to keep records independently. In this case, the director himself is engaged in accounting. This implies that he has knowledge in the field of accounting and reporting, rules and regulations on accounting, paperwork and document management. Today there are online services that greatly help in the work, even with minimal knowledge in the field. You can hire a separate accountant or even entire accounting, depending on the needs of the company. In this case, accountants get a job in accordance with the requirements of the Labor Code, they are paid salaries and deductions to specialized funds.
- An agreement with an audit or consulting third party. In this case, all accounting obligations fall on the shoulders of third-party company specialists. The main concern of the customer is to pay for services on time. There is no need to search for candidates for the position of accountant, test it and choose from the mass of applicants, no need to pay wages and contributions to social funds. But usually the price of consulting services is several times higher than the salary of an average accountant.
Subjects and objects of internal control
In the process of exercising control, it is possible to distinguish its subjects and objects. Subjects - persons carrying out actions aimed at obtaining the result of the audit, that is, owners or officials who are entrusted with these obligations. There are several levels of subjects:
- the first level - the owners or members of the organization, initiating the audit by necessity or by their own decision;
- the second level - the executors of the control process (members of the inspection commission, or third-party auditors who are assigned these obligations by virtue of their position or contractual obligations);
- the third level - employees whose job responsibilities include the exercise of control functions;
- the fourth level is the personnel performing the audit due to the new need.
Inspection objects are objects that control is directed at. They may include organization resources, security systems, personnel, financial results and other components of economic activity that arouse interest among various users of the information sought.
Organization of an internal control system
Internal control provides information and confidence in the organization of many users at once. It should be arranged in such a way as to satisfy the interests of all persons for whom information on the financial condition of the company and its position on the market is important. To do this, control should concern the following components of business activity:
- completeness and reliability of information reflected in accounting, tax and management accounting, its comparability and continuity;
- the activities of the enterprise as a whole and its degree of reflection in accounting documents;
- the legality and effectiveness of the use of funds available to the enterprise;
- reliable protection of trade secrets;
- the attitude of the organization’s management to the identified shortcomings, the speed and approach to correcting them;
- Efficiency of transferring internal information and reporting to persons, the duties include the adoption of managerial decisions.
What is an internal financial control card?
The implementation of internal control must be approached systematically. In order to make the process more convenient, there is a special document - a card of internal financial control. In simple terms, this is a control plan with procedures and responsible persons (objects and entities). The process of documenting internal control contains a number of interrelated forms and reports. It should be noted that for some organizations the internal financial control card is compulsory, for others it’s just a convenient tool used at will.
The Ministry of Finance has developed a unified form of a card of internal financial control of a government institution. An example of a similar form is given in this material. It is mandatory for organizations that use budget funds in their activities. That is, state, state and municipal structures.
2017 Internal Financial Control Card: Verifiable Information
In the internal control of organizations, both commercial and state, it is important to affect all components of business activity. The following control procedures were reflected in the cards of internal financial control for 2017:
- Reconciliation of balances indicated in the documentation and recorded on the accounts of the balance sheet of accounting. Cash books, bank statements, reconciliations with counterparties, cashier reports, warehouse reports, that is, primary documentation, are considered.
- Comparison of the amounts indicated in the balance sheet at the beginning of the year, the annual report for the previous reporting period, the general ledger indicators and the amounts reflected in the sections of the balance sheet at the current date.
- Inventory of inventories, values, property.
- Control and reconciliation of accounts payable and receivable.
- Verification of the correctness of document management, compliance of paperwork with the requirements of the legislation, accounting policies of the organization, chart of accounts, other regulatory acts related to the scope of activities.
- Checking the availability and correct execution of the primary documentation, on the basis of which data are entered into accounting and reporting.
Content of the internal control card
The procedure for generating cards of internal financial control may vary in companies depending on the legal form, features of work, and sphere of activity. But in all the variety of forms of the document, details can be distinguished, the common lengths of all of them. The financial control card contains the following information:
- Title of the document;
- name of the organization in which it is adopted and approved;
- period of time for which the card is approved;
- name of objects of control;
- the official who is responsible for the transaction, in other words, the executor;
- the official exercising control over the completed operations - the controller;
- the method by which control is carried out (for example, checking the design of a document, reconciling data during an inventory with actual indicators);
- control method (continuous monitoring, continuous following, selective current, selective subsequent and others);
- the frequency with which control actions are carried out (in the process of formation, before approval, before the transfer of the document, after operations);
- job title, date of compilation of the card of the internal financial control of the treasury institution, example of signature, name and initials of the controller.
What is taken into account when developing a map
The specifics of the card of internal financial control depends on the conditions in which the organization operates, its form of ownership, a niche in the market, provision with labor, material and financial resources, and many other factors. For state and municipal organizations established clear samples of cards. Companies owned by individuals can develop this document on their own for internal use. When compiling it, several important points should be taken into account, namely:
- the relevance of different types, types and forms of checks for a particular organization at a particular moment of activity;
- the frequency and frequency of inspections at which the organization will work most productively;
- the state of the organization, its availability of resources necessary for the implementation of inspections (financial, labor, technical, material, temporary);
- uniform distribution of the load when conducting checks on existing controllers, as excessive labor activity leads to fatigue, which in turn leads to errors, skipping important information from the view and other unpleasant consequences.
Additional requirements for public sector control cards
Budget operations for the card of internal financial control - the basis and reason for its compilation. In the public sector, this document is indispensable. But if in commercial organizations the card structure can be approached creatively and proceeding from the needs of the company itself at a given moment in time, then with state-owned enterprises the situation is more complicated. Before signing an order approving an internal financial control card for an organization of a municipal or state nature, it is necessary to make sure that all the requirements for its structure and composition are met. These requirements can be represented by the following list:
- transparent directions of inspections in understanding;
- reflection of areas of business in which audits of budget operations are carried out;
- a detailed description of the algorithms with which the verification is carried out;
- clearly established dates for inspections, their compliance and confirmation;
- the boundaries within which control activities are carried out.
For some public sector organizations, mandatory audit plans are issued at agency level. That is what companies should strictly follow. These instructions can be issued at different levels of government:
- Federal documents, regulations and letters agreed upon with the Ministry of Finance of the Russian Federation and binding on the entire territory of the Russian Federation.
- Regional legal acts, regulations, letters, decrees and requirements in force in a certain region, district or territory. For companies that are geographically located within these boundaries, these requirements are mandatory for the content and structure of internal financial control cards. A sample of the filling of such documents upon approval is approved by the Federal Service for Supervision of Financial Supervision.
Failure to comply with audit requirements or failure to comply with decisions may lead the organization to serious sanctions provided for by the RF Code, depending on the severity of the financial crime.