Examples of How Internal Control Is Understood

Even among graduates of accounting and auditing, undertanding internal control seems to be a challenge.

In several pre-hiring interviews I conducted with prospective Internal Auditors, Accounting Staff and even among candidates vying for supervisory positions in either Auditing or Accounting, it was not unusual for me to hear one attempting to define or describe Internal Control as a control exercised or implemented internally. Attempts to further clarify often lead to distinction of external auditing as one being undertaken by External Auditors as opposed to Internal Auditing being undertaken by Internal Auditors.

Instead of dismissing the chance of the applicant outright, I usually took it as a rare chance of exploring further why this so simplistic and almost idiotic answers could come out from supposed literate people on the subject. In most cases, I established that the primordial cause of this lackluster understanding was lack of experience.

I moved on with the so called practitioners. Those who had either been in the practice of accounting or auditing for at least 3-5 years. Indeed, it was gratifying to note that quite a number could readily describe Internal Control verbatim as it is defined in the books. That "it comprises the plan of the organization and all the coordinate methods and measures adopted within the organization to safeguard its assets, check the accuracy and reliability of records, promote operational efficiency and encourage adherence to prescribed policies and procedures".

True to its form and context, we could readily glean the aura of expertise and dependability from the words of the so-called practitioners. However, beaming the next question to test the level of the respondent’s understanding of what were said, a wide array of varying interpretations come about in even more diverse fashion. Again, why? If even among practitioners and supposed experts, they have varying interpretations of what Internal Control is, what more the non-practitioners, the operating managers, personnel and staff.

What about the senior managers who are supposed to be part of the Internal Control Process or at the least, of the Internal Control Structure?

As I continue to run several purposive yet discreet checking on the level of understanding about Internal Controls across various level of functionaries in various organizations, revealing reality comes in to fore. And that is, there is indeed a compendium of misunderstanding or misconception about the subject matter. From a relatively specific subject matter, too often the discussion proceeds and moves around the more general term of “control”.

With the unarguable adjective “Internal” before the word Control, there usually is a convenient way of playing what the whole subject matter meant. To many, Control is associated with either or a combination of the following meanings:

Control is preventing from happening
Control is checking
Control is auditing
Control is cost cutting
Control is monitoring
Control is controlling through policies, procedures, systems
Control is not allowing or disapproving.
Control is cushioning of impact
Control is a tool of management
Control is budgeting
Control is not doing wrong
Control is doing it right the first time

Obviously, there are many other descriptions that could evolved, and indeed, all of the above are correct. They respondents are absolutely right. The question however remains, so what is Internal Control then?.

Certainly, the answer at this point could easily be flawed with a limitless boundary of what other description could be advanced or offered as what indeed internal control is.