ControllingControlling involves ensuring that performance does not deviate from standards. Controlling consists of five steps: (1) set standards, (2) measure performance, (3) compare performance to standards, (4) determine the reasons for deviations and then (5) take corrective action as needed (see Figure 1, below). Corrective action can include changes made to the performance standards—setting them higher or lower or identifying new or additional standards. Performance standards are often stated in monetary terms such as revenue, costs, or profits but may also be stated in other terms, such as units produced, number of defective products, or levels of quality or customer service. Show
Figure 1. Five-Step Control Process The measurement of performance can be
done in several ways, depending on the performance standards, including financial statements, sales reports, production results, customer satisfaction, and formal performance appraisals. Managers at all levels engage in the managerial function of controlling to some degree. CostsFinancial costs—direct
(i.e., paying for an accountant for an audit) and indirect (i.e., people employed by the organization whose primary function is related to control—internal quality control, for instance). BenefitsCost and productivity control—ensures that the firm functions effectively and efficiently. KEY TAKEAWAYS The control function can be viewed as a five-step process: (1) Establish standards, (2) Measure performance, (3) Compare actual performance with standards and identify any deviations, (4) Determine the reason for deviations, and (5) Take corrective action, if needed. Check Your Understanding Answer the question(s) below to see how well
you understand the topics covered in this section. This short quiz does not count toward your grade in the class, and you can retake it an unlimited number of times. Licenses and AttributionsIs the process of checking regulating verifying or making adjustments to keep things?The word control suggests checking, testing, regulating, verifying or adjusting. The control provides the basis for future action. It also helps in taking corrective action to meet the standards. Controlling is having a need to control other people's behavior.
Which one of the following is the method of assessing the internal control system of an entity?ICR is an overall assessment of the internal control system and its adequacy of each business area in an organization to address the relevant risks. Through control review, an organization's resources are directed, monitored, and measured in an effective manner.
What is internal control process?Internal control is a process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance: That information is reliable, accurate and timely. Of compliance with applicable laws, regulations, contracts, policies and procedures.
What are the 4 types of internal controls?Preventive Controls
Separation of duties. Pre-approval of actions and transactions (such as a Travel Authorization) Access controls (such as passwords and Gatorlink authentication) Physical control over assets (i.e. locks on doors or a safe for cash/checks)
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