The current state of the national economy, the rapid spread of its shadowing becomes the reason for the growth of financial crimes in the monetary aspect of companies, institutions and enterprises, which necessitates monitoring the distribution and redistribution of financial resources, as well as the rule of law and the correctness of the creation of data on the financial condition of a certain financial subject. This requires financial control.
Control concept
The term "control" comes from the French word contrôle.
In a general sense, it can mean:
- checking, viewing something, comparing the actual state with the desired state;
- observing someone or something, understanding something;
- institution or person who controls, checks something.
Control is a process that belongs to all areas of human life.
Control is a necessary attribute of state power. The actual exercise of full power is unthinkable without control. Control consists in observing, determining or detecting an actual state, comparing reality with intentions arising from adverse events, and informing competent departments of the observations made. However, without a decision to change the direction of the audited entity.
Control is usually understood as checking the correspondence of the existing state to the postulated one, determining the degree and reasons for the discrepancies, and transmitting the results of this discovery. As can be seen from the above definition, the establishment of facts is an important feature of the control measure But no less important than its reliable documentation and assessment of controlled activity.
Financial control concept
Financial control is an element of management, the financial management process. Its task is to provide information on the quality of work and the functionality of the economy. It also helps to identify areas where various adjustments are needed. In recent years, numerous changes in financial control have been observed.
A standard understanding of the term “financial control” is manifested as the statement of the actual state with the current status and the coordination of possible errors and deviations, as well as checking the legality of the elements, protecting resources and ensuring the reliability of reports.
Financial control is a special type of control, the subject of which is phenomena and processes, mainly related to finance. The literature also has a concept that coincides with the concept of general economic control. As a rule, it is adopted by the state and is aimed at reaching agreement between the actual state (execution) and the current state (purpose). The purpose of the audit is to ensure consistency between the course and outcome of a specific action.
Financial control, therefore, is an activity that consists of the following basic elements:
- determination of the actual state, that is, the individual stages of the work and its results;
- comparison of the actual state with the laws to determine any inconsistencies that may arise;
- detecting the causes of discrepancies between the actual work and the definitions, signaling the competent departments of the observations made.
Post-control activities usually belong to other bodies of the management system.The concept of financial control has many common features with other similar concepts, for example, with supervision, verification, analysis.
In practice, the concept of financial control used can be understood in two forms - to express the assessment and reporting course and as one of the elements of the management system, which includes procedures, rules, employee responsibilities, ethical standards and other elements.
The economic importance of financial control
The economic value of this concept is as follows:
- stimulation of aspiration of control objects to ensure the legality of financial management procedures;
- optimization of the capital management structure in the company;
- assistance in solving systemic economic problems of the state and society.
That is, the institution of financial control is important both for a particular enterprise and for the state as a whole.
Criteria for financial control
Three criteria of financial control can be distinguished: legality, planning and profitability.
- Law and rule of law: this is the main criterion used for a long time, which is the most common. Supervisors should be well prepared in terms of legal knowledge (jurisprudence, economic and administrative studies) and constantly update their skills, as the law is constantly changing. Accurate understanding and interpretation is necessary for conducting an audit.
- Planning: using this criterion, one should take into account the many reasons for the discrepancy between the given actions and the plan, as well as flexibility and adaptability to previous unplanned actions. Studying and evaluating plans is complicated because plans are often very detailed and accurate.
- Economics: otherwise - the principle of rational action. This is a criterion that combines elements into a single whole. During the audit, it must be demonstrated whether a particular activity complies with the principle of the economy, that is, it must be included in the economic and financial functioning, for example, the optimization of production processes, increasing work efficiency, and improving quality.
The need for financial control
Many factors make control in an organization a necessity. These include:
- changing environment;
- the growing complexity of the organization;
- employee errors;
- the need for managers to delegate authority.
In the most stable sectors there is no such situation that there are no changes in the environment of the organization:
- markets move, expand or contract;
- new legal regulations issued;
- Product price volatility is increasing.
Thanks to the management function, changes are detected that affect the services or products of the company, and then they can resist the threats or opportunities arising from these changes.
The growing complexity of the organization. Modern organizations need ways to manage more formalized and thoughtful methods:
- it is necessary to carefully form various product groups;
- improving quality and profitability;
- information should be strictly recorded, and on this basis, domestic and foreign markets should be analyzed.
Decentralization is growing, many organizations have regional sales and marketing offices, dispersed research centers and geographically dispersed production facilities. Decentralization can help control the organization, because not all of its operations require control from the central office. The implementation of established standards should be strictly monitored so that managers can evaluate the effectiveness of the units they control, and management - the effectiveness of employees.
If managers and their subordinates never made mistakes, they could easily implement performance standards.However, members of the organization are mistaken in ordering the wrong parts, making the wrong price decisions, and incorrectly recognizing problems.
The management system allows managers to detect such errors before critical consequences occur.
The transfer of rights to subordinate employees makes it necessary to verify their actions in the independent implementation of the task. In addition to a preliminary discussion of the task with the employee, he / she is provided with relevant material resources (money, equipment) and time.
The goals of financial control
Financial control is the control over the legality and regularity of the distribution and redistribution of financial resources in the monetary sphere, as well as the legality of providing information on the financial position of the company in the context of all the characteristics presented.
The object of financial control is the purpose of verifying the correctness of activities in the field of finance. As well as establishing the correctness and monetary rule of the company in the field of creation, distribution, redistribution, use of existing financial resources.
Financial control provides a thorough check of all parties to the monetary work and applies to all business entities without exception. This is due to the fact that all business entities carry out financial activities. The object of financial control is the financial activities of the company.
Tasks of financial control
The object of financial control are the tasks of managing financial resources.
The main tasks of financial control include:
- verification of financial obligations of the company by executive bodies to the state;
- compliance of the necessary distribution of resources with the planned;
- checking the use of resources for expediency;
- checking the rules regarding the execution of financial transactions, cash settlements;
- determination of internal reserves of production and compliance with payment discipline.
After the implementation of the tasks of monetary control, financial discipline is strengthened. In changing the economy, the role of municipal control over the movement of funds is expressed in the fact that when working on control, an audit is observed over the implementation of the established legislation in the country, as well as the soundness of work from a financial point of view. In addition, it is necessary to ensure that control over the distribution of resources is consistent with the country's main tasks. It is necessary to ensure the legality and desirability of financial work.
As already mentioned, financial control is an extremely important link in the monetary system as a whole, since it provides a system in which income is generated and organizational costs are covered. Productivity of financial control is the main element of the economic activity of the organization, which must be very effective. The embodiment of financial control in almost everything depends on the legislative framework.
Financial control is a mechanism that ensures the legality of financial work.
Key tasks of financial control
All tasks can be divided into two large groups, presented in the table below.
| Associated with ensuring the legality of financial resource management procedures | Related to the legal protection of stakeholders |
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Objects of financial control
The object of financial control are the types of company resources:
- company funds;
- company settlements with partners (customers, customers, sellers and contractors);
- employee remuneration calculations;
- settlements with the budget and municipal funds;
- monetary indicators;
- operations with the capital of the company;
- operations related to the sale of products (products, works, services), etc.
However, not everything relates to objects of the sphere of financial control. When answering the question: “What is not an object of financial and economic control?”, We note:
- state and behavior of the object of control;
- carriers of practical activities to exercise control.
Characteristics of financial control objects
The object of financial control is monetary relations. The source of information regarding the implementation of financial control is the data of cash accounting and financial reporting of the company. Financial control is manifested in all forms that are associated with control activities. As a result, in the case of municipal companies and budgetary institutions, financial control is carried out in the form of an audit. At private enterprises - in the form of an independent audit. In budgetary institutions, control is carried out regarding budget execution.
Current monetary control over the use of financial resources of the treasury is carried out in the form of fiscal control. At municipal enterprises and in budgetary institutions, based on the beliefs of the productivity of using financial resources of the treasury, a municipal audit is carried out. In all companies without exception, based on the conviction of the rule of law and correctness, the calculation and payment of tax payments, fees and mandatory payments, a tax audit is carried out.
The objects of financial control of enterprises are the company's business processes. Internal business units are part of ongoing financial control. In this case, monetary control is in the form of internal control. In banking institutions, in order to ensure law and order, correctness and productivity of operations, control and audit are conducted.
Financial control should focus on the key object of the company's activity - cost control. The object of financial control is the costly sphere of the enterprise.
Cost control controls the control of costs incurred to complete a task. The team leader should take into account the amount of planned costs, actual costs and progress achieved in the implementation of the work provided for in the plan. The object of financial control are costs, which are characterized by the following points:
- they are carried out at the appropriate organizational level (management level in the organizational structure of the company or project);
- the costs incurred must be posted, and the results readily available;
- the control system displays not only the costs incurred, but also the funds involved;
- costs are taken into account in a system such as in the estimate so that you can easily compare the cost plan with execution.
Subject of financial control
The objects of financial control are entities in the following areas:
- authorities;
- banks, auditors;
- higher structures;
- Intracorporate and interdepartmental structures.
Let's consider each of them in more detail.
Authorities
The executive bodies, which are most often supervisory agencies, are the Ministry of Finance, the Federal Service for Financial Monitoring, the Federal Tax Service, the Federal Customs Service, state off-budget funds, the Federal State Treasury and their subordinate vertical structures in the regions.
The competent authority often determines the specific name of a particular type of control. For example, the Federal Tax Service conducts a tax audit, FCS - customs.
Regarding the legislative branch, monetary control is most often carried out by the Accounts Chamber, created with the participation of the State Duma and the Federation Council of the Russian Federation. Audit chambers with the participation of local parliaments have also been formed in the subjects of Russia.
Law enforcement agencies that can use financial control: the Ministry of the Interior, the FSB, the Prosecutor General.
Banks, auditors
The subject of financial control can be both the Central Bank and commercial credit institutions. The latter are responsible to the central bank.
Auditors can be external and internal. The former usually produce cash controls on a commercial basis as a service. At the same time, indicators of this control are transferred to an external entity, for example, a financier or a bank.
Internal audit - a subtype of financial control within a company or department. Its indicators are usually used in a particular organization. This is done by the internal services of the company. However, from time to time, companies turn to external auditors providing outsourcing services.
Higher structures, social activists
Financial control can be initiated and carried out by the institution responsible for a lower-level company or a budget company.
Public associations can initiate financial control procedures. At the same time, they can be either independent inspection bodies (if they include competent employees who are able to carry out appropriate control), and send applications for review to other bodies whose work is in one way or another connected with the organization.
The subjects of financial control are internal structures.
The work of internal corporate or intra-departmental financial control units is usually characterized by an even narrower focus than the work that the above structures can do.
Financial control in public administration
The object of state financial control is the correctness of budget spending.
Public financial control includes internal audit, which is built into the structure of individual units of the public finance sector, and coordination mechanisms of the central system, which are part of the structure of the Ministry of Finance. This Ministry is an integrated system that ensures the proper functioning of units of the public finance sector, creating opportunities for improving the efficiency of public funds management at the level of individual units.
The financial control system is a modern management tool in units of the public finance sector and the process of adapting legislation to the requirements of standards. While financial control serves the purpose of verifying the reliability of financial management in both the public and private sectors, control of public finances is associated with the collection and distribution of public funds and property management.
The objects of state financial control are:
- ensuring compliance with control procedures and conducting a preliminary assessment of the desirability of making financial commitments and spending; checking and comparing the actual state with the required state, collecting public funds, accepting financial obligations and spending funds from public funds, concluding government contracts and returning public funds;
- financial management and application procedures.
The control function of the state is of particular importance from the point of view of the efficient use of public funds due to their significant mobility and ease with which they can be misappropriated. This function in a democratic state is performed by various actors using various methods.
The objects of state municipal financial control are not non-monetary relations between entities.
In general, control is divided into internal, that is, that which is carried out by the control bodies of the organization, and external, carried out by specially designated bodies. All organizations operating in the public finance sector have their own internal control, including those dealing with financial matters. In each of them, control functions are also performed by the main accountants, whose task is:
- preliminary control of a financial event;
- current functional control;
- control over the implementation of financial plans;
- subsequent control of business operations, carried out after their input.
Special departmental services, the rules of which are determined by the Minister of Finance, conduct checks in subordinate units, such as chambers, tax, customs authorities. The main types of external state financial control are:
- presidential control;
- parliamentary oversight;
- control over financial management of local authorities;
- tax control;
- customs control;
- currency control.
Conclusion
Under financial control is understood a procedure that is aimed at assessing the conformity of the activities of an organization in the field of cash management with the norms and standards of legislation. The key tasks of financial control are ensuring the legality of procedures and legal protection of interested parties. The object of financial control is the financial activities of the company.