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INTERNAL CONTROL MODEL

CHAIR:

Internal Control

LECTURER:

Cpc. Sulfa Marleni Aquino Castillo

MEMBERS:

CARHUAVILCA TORRES EDELY

ESPINOZA ALANIA, CAROLIN
GARCIA DIAZ BERTHA LUZ
NEYRA TONE ABIGAIL
NEYRA TONE WILDER
VEGA CANCHANYA LUIS ALBERTO

UPLA VII CYCLE–2013

CHANCHAMAYO–PERU

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INDEX

INTRODUCTION

CONCLUSIONES

ANNEXES

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INTRODUCTION

In recent years, as a result of the numerous problems detected in

the entities of corruption and fraud, which have involved even corporations
internationally, Internal Control has been strengthened and implemented in different
countries, as they have realized that this is not a topic reserved only
for accountants but it is also a responsibility of the members of the
Boards of Directors of the different economic activities of any
organization or country.

This research is based on the control models applied to auditing.

computer science, since control models are reports that allow tracking the
pautas para la elaboración de los sistemas de control interno, a continuación
we will describe one of the models such as COCO, as there are many more
models.

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CHAPTER I

INTERNAL CONTROL MODEL

THE CRITERIA OF CONTROL BOARD

THE CRITERIA OF THE CONTROL COUNCIL
COCO – 1995

1st PRECEDENT:
This model was introduced by the Canadian Institute of Chartered Accountants.
Certificates (CICA), through a council responsible for designing and issuing criteria
General guidelines on control. The council called The Criteria of
The Control Board issued the model commonly known as COCO.

2nd CONCEPT:
The control includes those elements of an organization (including its
resources, systems, processes, culture, structure, and goals) that taken in
They support the staff in achieving the organization's objectives.

The control is carried out or implemented by the staff of the whole

organization, including the board of directors or its equivalent, the
administration and the rest of the staff.

The personnel who are responsible (both individually and in teams) for achieving
specific objectives, must also be responsible for the effectiveness of the
control that supports people's compliance.

For a control to be effective, its elements must be suitable for its

Goal, to be consistent with each other, and to have the flexibility to adapt.

This means that when changes are considered in any.

From control, one should only expect to provide a reasonable security, never.
an absolute guarantee.

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Firstly, because there are inherent limitations in control that include,

among others, the possibility of judgment errors in decision-making, the
occurrence of human errors, the collision between two or more people to avoid the
control, as well as the conscious omission of controls by management.

Therefore, control can help minimize the occurrence of errors or failures.

but absolute security cannot be provided that they will not occur.

Secondly, the cost/benefit aspect must be taken into account.

when control is designed in organizations. The cost of control must be
proportional to the expected benefits and the risks should be considered
accepted for their design and management.

Effective control requires maintaining a balance between autonomy and

integration and between consistency and adaptation to change.

Maintaining this balance sometimes requires deciding between centralization and

decentralization; between the imposition of strict rules to maintain the
consistency and sometimes for greater efficiency, or allowing a certain
freedom of action in pursuit of greater flexibility to respond to change.

These objectives can refer to one or more of the following categories:

Effectiveness and efficiency of operations.

Reliability of internal or external reports.

Compliance with applicable laws and regulations as well as policies

internals.

3° ORGANIZATIONAL OBJECTIVES (effectiveness and efficiency of the

operations)

. Customer service
. Safeguarding and efficient use of resources
. Obtaining benefits
. Compliance with social obligations
. Seguridad de que los riesgos son debidamente identificados y
managed

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4° RELIABILITY OF INTERNAL AND EXTERNAL REPORTS

. Maintenance of proper accounting records.

. Reliability of the information used.
. Information published for interested third parties.
. Compliance with applicable regulations and internal policies
. Ensuring that the organization's activities are conducted in
total compliance with the legal framework and internal policies.

5° NATURE OF CONTROL
The control encompasses all elements of an organization (including its
resources, systems, processes, culture, structure, and objectives) that taken in
set, support people in achieving their goals
organizational.
. The control must be carried out by the staff of the entire organization, who
will be responsible for the design, establishment, supervision, and maintenance
of control.
.
The personnel responsible for achieving certain objectives must also
evaluate the effectiveness of the control within its sphere of competence and of
report such evaluation to whom he is responsible.

. The cost of the control should be proportional to the expected benefits.

. Control requires a balance between autonomy and integration and between

consistency and adaptability to change.

. Considering that an organization can be defined in different ways

In forms, the COCO guide establishes that an organization must be
understood as a group of people working towards achieving certain
objectives, therefore, the objectives are a determining factor of what
what should be included or excluded from an organization.

. It is very important to always keep in mind that the COCO guide is

based on the understanding of what is stated there as a concept of
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"control" and therefore, those organizations that intend to apply the

guidelines of the COCO, must have a clear understanding and
consideration of the five components that make up the Integrated Framework
of Internal Control published by COSO:

Control Environment.
Risk Assessment.
Control Activities.
Information and Communication.
Monitoring or Supervision.

According to the above, the Canadian model is in total agreement with the
American model; however, it presents a different proposal in
as for the way control is conceived for its practical application
in organizations, which derives from the aforementioned interpretation of
what should be understood as an organization and that in a very
simple is explained below:

6° "COCO" IS NOT AN AUTHORITY, HOWEVER

RECOMMEND:
Governing bodies and administrators, to use the guide for
help them improve the efficiency and effectiveness of their organization and
to demonstrate that they are doing it.

Shareholders, owners, investors, creditors, etc., to use the

guide in decision-making about organizations in the
those that have some interest.

Internal auditors and external auditors, within their mandate, to

use the guide to direct and lead your work.

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7th CYCLE OF BASIC UNDERSTANDING

Purpose
Commitment
Aptitude
Action
Assessment (Self) and Learning

8° CONTROL CRITERIA
CRITERIA:
It is the basis for understanding the control of an organization and for making judgments.
about its effectiveness. The effectiveness of control in any organization
can be evaluated using these criteria regardless of the type of organization or how
objetivos que persiga.
The criteria are set as goals to be permanently fulfilled and
they do not constitute, therefore, minimum requirements that are interpreted
simply as acceptable or not.

The criteria need to be interpreted in the context of the objectives.

particular, for example, for a goal related to customer service
client, the criterion that refers to performance evaluation could be
interpreted in terms of accuracy and timeliness in filling the
orders, the feedback obtained from the customer, etc.
The COCO criteria, like the components of COSO, are totally
interrelated with each other, in the same way that they are interrelated
elements of control in an organization; for the same reason, the elements of
control, they cannot be designed or evaluated in isolation from one another.
The control criteria are the basis for understanding the control of an organization.
are set as goals to be fulfilled permanently, they are:

Design
Evaluate.
Develop
Modify
Purpose
Commitment
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Ability
Evaluation and learning

9° STRUCTURE OF THE CONTROL MODEL

A control structure provides the framework and the way in which
the important elements of control must be understood or interpreted
including the basic relationships between them. In the COCO Guide, the structure
control is built with the definition of control, the control criteria and the
the way in which the criteria are grouped. The structure of the Canadian model
provides a comprehensive and highly useful overview of control. The content of the
Guide requires creativity for its interpretation and application, as it offers a
great flexibility regarding how the control is implemented, without prescribing or
impose a detailed set of policies and procedures. Any
organization can adopt the structure as presented in the Guide, adapt it
to their own interests or use it as a reference to develop their own model.
In this regard, it should be taken into account that, in any group of criteria, some
aspects stand out more than others, and the criteria can be regrouped to
satisfy particular circumstances; however, it is very important not to forget,
that all criteria need to be considered in any regrouping
let it be done.

For example, an organization may have established a model of

management, whose structure contains its own routines, philosophy and
vocabulary, and in case of trying to adopt the control structure proposed by the
The COCO guide does not mean that everything existing should be discarded; it
it would be advisable to compare the current approach of management with the
structure of the COCO model and modify only those aspects that are
necessary to improve your control.

10° THE GUIDES ON CONTROL

The document is designed to help improve control. It describes and defines the
control (more than the specifics of traditional financial accounting internal control),
and establishes criteria for effective control in an organization.
Provides a framework of reference that people across the entire organization,
it can be used to develop, evaluate, and change control. However, it does not attempt

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provide a detailed guide on how to design an organization, existing

for them, many methodologies described in texts on management.
An effective control can support the success of an organization in different areas.
shapes:
• Staff, while performing their functions, can exercise their judgment and creativity, when
time that manages or controls the risks of inappropriate actions occurring.
The staff has the flexibility to promote wisdom in the organization or management, to
to have a proper understanding of the risks.
The staff has reliable information and is able to use it at the moment.
opportune and at the most appropriate level in the organization.

The organization can achieve improvements in effectiveness and efficiency, and obtain more
trust from interested third parties.

11th COCO REPORT:

The COCO Report isis productfrom a thorough review of the Criteria Committee
Canada's control over the COSO report and whose purpose was to make the
a simpler and more understandable report, in light of the difficulties that
in the application of COSO they initially faced [Link]
The result is a concise and dynamic report aimed at improving control, the
which describes and defines control in almost the same way as the Report does.
COSO.
Ethe modelCOCO was released in 1995 by the Council known as 'The Criteria of
"Control Board" and made known by the Canadian Institute of Chartered Accountants
Certificates (CICA) through a Council responsible for designing and issuing criteria
General guidelines on internal control.
Until now, Internal Control has been treated by management as something
alien to them. It has only been of theirinterestin those moments when they are carried out
controls, supervisionauditsand other actions in which it is evaluated.
it entails responsibilities in its performance. This is attributable to a lack of
information and updates on modern management trends and approaches
towards internal control.
Most of the definitions given by the different authors studied
they agree in cataloging internal control as a set of measures,methodso
procedures (in the Coso Report and in Resolution 297 it is analyzed as a
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process) that allow for better protection of resources, greater

reliability in information, ensuring compliance with all laws or
regulations established by the management and efficiency andeffectivenessof the
operations.
Ethe changeimportant that the Canadian report raises is that instead of
conceptualize the control process as a pyramid of components and
interrelated elements, provides a framework through 20
general criteria that the staff throughout the organization can use to
design, develop, modify or evaluate the control.
The so-called basic understanding cycle of control, as represented in the
The report consists of four stages that contain the 20 general criteria.
shaping a logical cycle of actions to be executed to ensure compliance
of the organization's objectives.
In the structure of the report, the criteria are basic elements for understanding and,
in their case, apply the control system. Adequate ones are requiredanalysisy
comparisons to interpret the criteria in the context of an organization in
particular, and for an effective evaluation of the controls implemented.
The report anticipates 20 criteria grouped regarding:
1. Purpose.
2. Commitment.
3. Aptitude.
4. Evaluation and Learning.

a) Purpose:
Group the criteria that provide a sense of direction to the organization:
Objectives must be established and communicated.

The significant internal and external risks faced by a

organization for the achievement of its objectives must be identified and
evaluated.

The design of policies to support the achievement of the objectives of a

organization, and for the management of its risks, must be established,
communicated and practiced, so that the staff understands what is expected of them.
they expect and the scope of their freedom of action.

Plans must be established and communicated to guide efforts to

achieve the organization's objectives.
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The objectives and related plans must include targets, parameters, and
performance measurement indicators.

b) Commitment:
Group the criteria that provide a sense of identity and values of the
organization
Shared ethical values, including integrity, must be established.
communications and implemented throughout the organization.
Human resources policies and practices must be consistent.
with the ethical values of the organization and the achievement of its objectives.

Authority, responsibility, and accountability must be clearly defined.

defined and consistent with the organization's objectives in such a way
that decisions and actions are taken by the appropriate personnel.

An atmosphere of mutual trust must be fostered to support the flow

of information among the staff and for their effective performance towards the
achievement of the organization's objectives.

c) Aptitude:
Group criteria that provide a sense of competence or suitability of the
organization
. The staff must have the necessary knowledge, skills and
tools to achieve the organization's goals.

. The communication process must support the values of the organization and the
achievement of its operations.

. Sufficient and relevant information must be identified and communicated from

timely manner to enable staff to perform the
assigned responsibilities.

. The decisions and actions of different parts of an organization must

be coordinated.

. Control activities must be designed as an integral part of the

organization, taking into consideration its objectives, the risks to its
compliance and the interrelation of the control elements.
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d) Evaluation and Learning

This group includes the criteria that provide a sense of evolution of the
organization
The external and internal environment must be monitored to obtain
information that may indicate the need to reevaluate the objectives of the
organization or control.
Performance must be evaluated or measured against goals and indicators.
in the plans or objectives of the organization.

The premises considered for the organization's objectives must be

periodically questioned.

The information needs and the related information systems

they must be reevaluated as objectives change or when
identify deficiencies in the reported information.

A follow-up of the procedures must be established and executed, to

ensure that the required changes or actions were made.

Management must periodically assess the effectiveness of the control in

your organization and communicate its results to those before whom it is
responsible.
The COCO Guide considers that it could be useful for anyone
organization, expressing the criteria in the form of designed questionnaires ex
I profess to the organization and the circumstances.

The material from the COCO Guide can also be used to prepare information.
of support and in any case, the answers to such questions could be considered
as a starting point in the identification and discussion of the control process.

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CONCLUSION:

The structure of the Canadian model requires creativity for its interpretation.
application and it is adaptable to any organization once it is tailored to the needs
of their own interests, or use it as a reference to develop their own model.

The model aims to provide consistent foundations for such regulatory requirements.
in such a way that allows authorities to achieve their objectives, without this
establish excessive requirements that could jeopardize the efficiency of management.
For this model to work successfully, a high degree of commitment is required.
those involved as well as a thorough understanding of both general and
specific to the company's operations.

It is also necessary to have a clear understanding of the strengths and weaknesses of the
organization, its relationship with risks and the opportunity to achieve, in the best way, the
objectives of the same.

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