Internal control is not about one thing, but the process of combining many things to achieve goals.
Knowing that internal control is a process, it is easy to understand that relevant personnel need to participate in this process. The personnel in an enterprise are basically divided into these three aspects: board of directors, management and employees.
We mentioned earlier that internal control is a process to be completed by these three types of people, so what is its goal? According to the definition of the standard, there are three main objectives of internal control: finance, operation and compliance.
First of all, talk about the first target finance. The goal of financial internal control is actually to make the company's financial information more true, accurate and reliable through the process of internal control, so that the shareholders of the company are full of confidence in the company's performance and development prospects.
For example, my daughter-in-law is pregnant now and often needs to have a routine blood test. After the hospital check-up, there will be many indicators in the report, clearly indicating the actual value of your indicator and the normal standard value. In short, every ratio or value in this report will tell us the physical condition comprehensively. In order to get this qualified report, my daughter-in-law must insist on supplementing blood and iron, drinking milk and taking standard drugs every day.
The same is true for an enterprise. When an enterprise develops to a certain stage, it may need financing, merger and listing. At this time, the enterprise needs to have this qualified blood test report-"financial statement"
In fact, this is the relationship between internal control and financial statements, and financial statements are the fruits. Because of the internal control process, this qualified blood test report was finally obtained.
Next, the second goal is that internal control should help improve operational efficiency; In many enterprises, the operation department is traction, but the real internal control system should be streamlined, and the wall of docking and cooperation between departments should be dismantled.
Of course, process-oriented does not mean canceling the original department settings, but establishing processes and designing controls to connect the breakpoints and blind spots between the original departments, thus improving the overall operational efficiency.
For example, sometimes we can know the cash flow of a company by observing the daily relationship between the financial department and the front-end sales. The core is to observe who will manage the accounts receivable of this company.
In many enterprises, this matter has been vague; Logically speaking, the collection of accounts receivable should be managed by the operation, because customers know best, but front-end sales charge every day and concentrate on performance, and few people take the initiative to go back to deal with accounts receivable. At this time, the importance of cooperation and coordination between financial center and front-end sales is reflected.
If the two departments have a good relationship and communicate more, it will be much easier for the financial center to count the balance of accounts receivable first, check the data with the front-end sales department actively, and ask the sales department to pay close attention to the collection progress afterwards. In this incident, the two departments cooperated to analyze the aging and check the amount, which is the key point of the process connecting the two departments. Similarly, internal control actually promotes operational efficiency in this way.
Finally, let me talk about the third goal: compliance. At this point, this goal is much easier to understand. At present, whether it is listed in the United States or in China, internal control and compliance are the basic lessons that must be done, and they are bound by corresponding laws and regulations. Listing in the United States needs to follow the Saipan-oakley Act, and listing in the domestic A-share market needs to follow the Basic Standards for Internal Control of Enterprises and related supporting guidelines. We will share this part later.
Finally, to sum up, internal control is actually a process that the board of directors, management and employees of the company work together and follow, so that enterprises can operate more efficiently and realize the accuracy of corporate financial information and legal compliance.
Finally, this internal control process is a reasonable guarantee process, not a complete guarantee, that is to say, internal control can not completely guarantee the accuracy and truthfulness of enterprise financial information and the realization of legal compliance nationwide, because the process program is a process program after all, but it is difficult to control all risks related to human nature in the end, so internal control provides a reasonable guarantee process.