Internal cost control of the enterprise

In a market economy, the control and management of the financial activities of an enterprise takes a leading place in the functioning of any business entity. The main goal of a company is to obtain maximum profit, which is the first condition for successful business activities. The financial condition is due to the adequacy of the resources necessary for effective operation and their effective use in practice. The quality management of financial results depends on the sustainable pace of its activities and maintaining competitiveness. For effective management of financial results, the planning and forecasting stage is first carried out, where the necessary elements are business planning, formation of management accounting, planning of the future budget, forecasting the actions of possible bankruptcy, drawing up investment projects, etc. Financial results are a guarantee of all the goals set and fulfilled.

The relevance of financial performance management is due to the fact that the results of the analysis assess the competitiveness of the enterprise, its prospects for development, the viability and growth of the owner’s well-being. This is the first thing that creditors assess. For the successful operation of the enterprise, it is necessary to effectively use the internal control system. From the results and analysis of internal control, management can obtain a full report on the financial and economic condition of the enterprise, its solvency, prospects and reserves. The first thing a manager should do is identify the main directions that will help improve the organization of internal control, develop its internal standards, improve the regulatory framework, and it should be remembered that the effective implementation of these tasks is based on the fundamental and methodological values of the internal control system. Having studied the issues of accounting and organization of the internal cost control system, the head will be able to organize effective control, which will be aimed at improving the management of the enterprise, developing and implementing tasks that will work for the future of the organization.

A clear internal control procedure will allow for strong management decisions; its rational organization will achieve management goals, which will ensure the maximum positive result of doing business in the future; enterprises sometimes fail to minimize various risks in their activities; this leads to errors in checking accounting data or shortcomings in financial reporting. More than once, enterprises that have just entered the arena of business often do not have a clear understanding of the organization of control. Such problems can often occur due to insufficient skills of employees.

The essence of the concept of internal control varies even among scientists; their approaches to interpretation sometimes contradict each other; internal control is aimed at full compliance with internal management requirements, ensuring the fulfillment of staff duties, which will ensure the effective operation of each unit of the enterprise; it is important to use different types of controls; for the most part, the effectiveness of any organization depends on the implementation of cost control; each of the operations will be carried out systematically and reasonably. A real assessment of cost accounting will help to bring it out of the crisis in time and eliminate the factors and prerequisites that hinder the effective conduct of production.

The fundamental principles of control include the principle of objectivity and efficiency. The principle of objectivity reveals violations in the financial and economic activities of the enterprise, regardless of who benefits from the verified information obtained. The principle of efficiency is based on information about the costs of the enterprise. In the course of implementation, they should be less than the results. These principles simplify the achievement of the goal and adjust the activities of the enterprise. The internal control system is based on several elements:

• Separation of responsibilities is essential for correct accounting operations, and if each employee analyses their progress, the risk of misreporting will be minimized.
• For the implementation of accounting operations, decisions of responsible persons and effective procedures that authorize transactions and perform all formalities are necessary.
  provided for by the internal rules of the enterprise.
• Timely and systematically submit information to accounting registers,
  to document transactions, strictly according to the company’s internal regulations,
  Analyze transactions immediately and avoid mistakes.
• Keep records of property, use technical means and procedures that will serve to prevent the loss or unreasonable change of accounting documentation.
• Apply all elements of the internal control system to properly conduct inspections in the enterprise. In the process of studying internal control, it is necessary to know what procedures are carried out in the enterprise and whether they are used in production.

A robust internal control system allows for:

• control on the basis of an accurate and objective assessment of accounting, which is carried out by the chief accountant, his deputy or the head of the organization;
• regular control of all financial and economic activities of the enterprise, critical
  estimation of costs and losses incurred;
• generalization of the results of control and development of measures to eliminate errors;
• reporting of responsible persons of structural units for each of the processes in production, discussion of measures to eliminate shortcomings and taking measures to influence persons guilty of deviation from the production process;
• approval of the schedule of workflow and internal control system in accounting poly-
  Tick.

The study found that the issue of the organization of internal control by Russia has not been resolved. This issue is individual for each entrepreneur and owner of the company. First, the process of determining the subjects, objects and the main purpose and tasks of control. The subject of internal control of costs is the management or persons who are entrusted with control. These can be financiers, analysts, chief accountants or directors of structural units. The objects of internal control of costs are the documentation and accounting of expenses and cash receipts.

It is generally assumed that the cost control function rests only with the accounting department; it would be advisable for the enterprise to involve the inventory commission and financial analysts in the control, so that the economic performance of the enterprise is always stable and correct; control exists in every enterprise and is organized differently; what structure and methods the organization will operate according to the manager decides; Internal control is his responsibility; In accordance with the approved plan, employees carry out systematic ongoing control of the company’s activities. Management, drawing conclusions, makes effective management decisions to eliminate the causes that negatively affect the activities of the organization.

The most important goal of accounting control is to achieve management goals in order to ensure the maximum possible profit from activities; positive productivity will prevent the occurrence of errors and minimize various risks; first of all, the system of documentation and accounting is controlled, the legality of business operations is checked.

In accordance with the relevant methods and specifics, cost management is carried out, which ensures the organization of effective control over the reduction of production costs and makes a reliable calculation of the cost of production. In the study of internal control, it should be borne in mind that an effective accounting system will enable accountants to fully fulfill their control duties, timely submit reports and meet management requirements. The main goal of the accountant is to keep the books correct, and each of the operations must be legal and reliable. The creation of parallel information flows will allow the accurate display of entries in accounting registers. Cost management performs its tasks and purpose by successfully defining functions. Internal control is one of the very first functions of cost management. You can imagine that this chain of relentless interrelated activities that carry out synthesis, analysis, planning, regulation and accounting. Cost control functions can be divided into two categories:

1) meets the needs of the owner and provides reliable information to the organization of the undertaking;

(2) establishes a general cost control system.

In order to strengthen control, it is necessary to pay attention to the cost-effectiveness and correctness of the operations performed by the enterprise, control is always carried out in a comprehensive manner, this should be done by qualified professionals who are fully familiar with the production technology, the organization of quantitative accounting of values will allow efficient use of funds, rational conduct of transactions in the reception and sale of goods.

There are three stages in which internal control should be carried out:

1. At the cost budgeting stage, where the effectiveness of management decisions is evaluated.
   rationality and direction in achieving a strategic goal.
2. At the stage of regulation and organization of management decisions, where the following will be analyzed:
   Results based on the costs incurred.
3. At the accounting stage, where the most important stage is the control of financial and
   production resources in accordance with the approved budget.

It should be remembered that in order to optimize the organizational structure of the control process and each of its procedures, it is necessary to reduce the influence of the subjective factors of the supervisory authorities, this will ensure the objectivity, quality of generalization of conclusions and correctness of the proposals considered based on the conclusions of the control audits. After studying the accounting and organization of the internal cost control system, it is possible to determine the main directions for improving the control process in the enterprise.

• internal control must ensure the accuracy of the formation of the cost of products
  activities, works or services;
• Cost write-offs must be documented and correct;
• compliance with the plan and performance of tasks that are based on the principles of controlling and
  It is of fundamental methodological importance for its construction in the enterprise.

In order to qualitatively organize the control process, it is necessary to comply with a number of mandatory rules and requirements: firstly, a system of standards for areas, activities, form planned indicators and a system of standards, secondly, establish the level of permissible deviations, thirdly, determine the initial stages of internal control. «Evaluation of internal control systems» is divided into 4 stages (Fig. 1).

An enterprise internal control system is a process carried out by the board of directors, management and other personnel of the organization to identify events that may affect the enterprise and management, the risks associated with these events, and control to ensure that the objectives of the enterprise are achieved. According to ISA 315, “Identifying and Assessing Risks of Material Misstatement by Understanding the Organization and its Environment,” internal control is a process designed, implemented and maintained by senior authority, management and other employees to provide reasonable assurance that the organization has achieved its objectives with respect to the reliability of financial reporting, the efficiency and effectiveness of operations, and compliance with applicable laws and regulations. The term “control measures” refers to each individual aspect of one or more components of an internal control system.

According to the integrated COSO ERM model, an internal control system among a number of elements, such as the internal environment, goal-setting, control measures, organization of information and communication exchange, monitoring, includes such important components as risk identification, risk assessment and management. Enterprise risk management is a process that begins with the development of an enterprise strategy and affects all the activities of the enterprise. It aims to identify events that may affect the enterprise and the risks associated with these events.

The audit of the internal control system in the enterprise, which is carried out on individual business processes, involves checking the effectiveness of the organization’s risk management in respect of such business processes for a certain period of time, as an integral part of the internal control system of the company. A comprehensive audit of the internal control system of the company in terms of the reliability of the financial statements in all material aspects includes testing of internal control by auditors to achieve the main objectives, which are to obtain the following sufficient evidence:

• Confirmation of the auditor’s report on the acceptability of the level of development and the effectiveness of
  internal control of financial statements;
• the adequacy of the audit assessment of control risk for the purpose of auditing the financial report;
  Nothing.

It is advisable to conduct an audit of the adequacy of the development and effectiveness of the internal control system in the enterprise in relation to the main business processes of the enterprise. From the point of view of the sequence of stages of the audit process, which have their own characteristics, it is advisable to consider them in detail and identify the key rules and principles that guide auditors in their implementation. The stage of understanding the business process and its main business operations, the totality of which represents the business entity as a whole, cannot be correctly built without the concept of “business process”.

Business processes are operations that ensure the design, production and sale of goods, works or services of an enterprise. In addition to the traditional approach to determining the main business processes, in modern conditions, these include proper accounting and preparation of financial statements, as well as compliance with laws and regulations on financial reporting. The cycle of these operations is subject to proper registration and accounting.

In order to fully understand the business process and its main business operations, the auditor should consider the following key aspects:

• the main business processes and activities of the company, information about which is necessary for further audit procedures in order to confirm the reliability of the financial statements;
• risks associated with the implementation of business processes and operations in the enterprise;
• the nature of information processes in the enterprise, including software and information technology environment, as well as the distribution of responsibilities of personnel in
  within the information environment.

For an audit, it is important to distinguish between “business process”, which describes the procedure for conducting a transaction through specified stages, and “control”, which involves a set of actions and measures aimed at preventing or detecting inconsistencies in the process. For example, the business process is the choice and documentation by the accountant of the appropriate income tax model that will be used to implement the sale contract, and control is the review and confirmation by the controller of the income statement.

Thus, in the course of the internal control study, it turned out that for the effectiveness of the process, internal control standards must be developed, the regulatory framework must be revised over time and depreciation carried out. Internal control must be carried out on the basis of the chosen concept, which will ensure the efficiency of business activities, improve the future financial condition and the economic performance of the enterprise will go up.

If the accountant is overloaded, it is advisable to expand the staff and hire an internal auditor who will carefully monitor the distribution of profits, cost control, reliability and legality of financial statements. The information basis for making effective management decisions is the use of a reasonable system of internal control of the enterprise.