Control is an integral part of the long-term strategy of an enterprise or company. What are your goals? How is control carried out? This will be discussed in the framework of this publication.
general information
External and internal control is used to obtain information about the current state of the organization, as well as to identify all existing abuses.
What is the difference between these types of controls? Internal is carried out by service in the organization itself and pursues such goals:
- increasing the effectiveness of managerial decisions;
- rationalizing the use of resources;
- achieving maximum profitability and profit.
It is carried out by specialists in the structure itself, as a rule, at the request of management.
External control is assigned to special audit firms, as well as government agencies. In this case, the most interesting for them is the establishment of the reliability of officially submitted data, as well as the formation of a conclusion on the verified company.
This is often accompanied by the development of recommendations or direct decrees (only in the case of the state) to eliminate shortcomings and shortcomings. Despite such difficulties, an external audit is not always mandatory - an economic entity may also want to conduct it on a voluntary basis.
What is the purpose of internal control?
The relevant services within the organization carry out:
- Monitoring the appropriateness and effectiveness of using own, borrowed and borrowed funds.
- Analysis and comparison of actual results with predicted.
- Calculation of financial estimates for investment projects.
- Organization status monitoring.
After verification, you can use financial analysis tools to make more effective and necessary management decisions. But for a full vision of the picture, both external and internal control are necessary. Why so?
Objectives of External Control
If we talk about the state, then for it checks are necessary to qualify the solvency of the enterprise, as well as to assess the risk of bankruptcy. By the way, many people think that if the appeal is to a private enterprise, then external and internal control should not be separated, since the experts involved will work on internal documentation. This is partially true, but not completely.
Yes, a private company develops its assessment, largely focusing on internal documentation. But only to the one that the audited organization itself presented to them! And in this case, manipulation is possible. If it turns out that there are certain discrepancies in the internal data or if they are refuted by external information, then in this case a verdict is issued based on the verification results - the information is false and the organization itself is doubtful.
In our age of information, in order to set the external and internal control on a false track, it is necessary to be a real virtuoso, which, of course, is not within the power of the vast majority. After all, you need not to miss even the smallest detail. Therefore, external and internal state control finds violations so easily. But that's not all.
Features of internal control
In this case, the owners or management are engaged in the formulation of the tasks pursued. Moreover, in their decisions they proceed from the needs of the organization. As a rule, in this case, individual functional tasks are solved. The purpose and means are chosen independently. The contractor performs specific tasks received by him from the management to which he submits. After collecting and processing all the data, they are transferred to the higher authorities.
Features of external control
In this case, a third party is involved. Let's take as an example the interaction of an enterprise and an audit company. The goal most often is the need to assess the reliability of the existing financial statements. Moreover, how the work will be organized is determined by the auditor. It should be noted that in this case you have to interact not with a subordinate, but with an equal partner.
Interconnection
Despite certain differences, the external and internal control of the organization is similar and in many ways allows you to complement yourself and get a holistic view of the situation at the enterprise. Even the same methods can be used. But because of the detail, the difference in the accuracy system, as well as a number of other factors, the results may vary by an order of magnitude.
Specificity
Let’s take an example of internal and external financial control in production. Alas, in this case, the facts of theft or secret sales of products by employees are quite common. To keep the situation in line with theory and called for internal control. But in reality, the responsible person may neglect his duties or even enter into a criminal conspiracy. Therefore, in order to prevent the loss of funds, the tactics of double control should be implemented.
Particular attention is paid to the audit. This is the name of verification, which confirms the reliability of reporting, the processes of its formation, the legality of ongoing business operations, as well as their economic feasibility. Production control itself can be carried out in an extra- or planned manner.
The first case is very likely if there is a suspicion of abuse. Whereas the second option is necessary to maintain the situation in a stable position, and if deviations are detected, to correct it. Also, in an unscheduled order, the state likes to conduct checks. True, not everything is as easy as it might seem at first glance.
In order to conduct an audit, it is necessary to provide the state with an excuse. Such can be data manipulation, concealment of funds and other tricks aimed at increasing net profit. In this case, production control will be carried out without additional notice so that the necessary documents are not destroyed.
Conclusion
As you can see, control is a useful and necessary tool. It allows the management and owners of the company to keep the organization in the air, not allowing negative moments or punishing the perpetrators when they are discovered. It is useful for the state in that it allows you to receive the taxes necessary for the functioning or other obligatory payments, to comply with the legality and expediency of the budget funds and subsidies spent.
What to do so that there is no need for checks? Within the organization it is necessary to ensure a clear and high-quality work of all the elements that take part in business processes. It’s more difficult with the state. Full control by the government cannot be avoided. But his interest can be minimized by conducting white bookkeeping, not trying to manipulate or hide part of the funds and work in accordance with current legislation.