There are five different elements of internal system control: control of environment, risk assessment process, information and communication, control of activities, and monitoring. While functioning separately on basic levels, these elements of system control are also interconnected, and this allows better functioning of any system as a whole.
Control of environment basically means that the surroundings in which an individual business operates must be observed and controlled. Losing control of the environment leads to a poorer business functioning and bigger risk due to the increasing uncertainty and unpredictability of some components. This element of system control may be viewed as the basis of any business because it makes sure that other components and the business overall operate with no malfunctions.
The second element is the risk assessment process. One of its functions is prognostication. It determines the possible adverse outcomes of any undertaking. Moreover, risk assessment allows evaluating the potential risks on multiple levels. There are primary risks, secondary risks, and tertiary risks. While the primary risks are predicted early and taken into account, risk assessment makes sure that no secondary hazards follow. If they do, the possible solutions and the risks of undergoing the procedures of managing the secondary risks are calculated, too. Tertiary risks, in turn, are represented by the potential or actual threats 8that follow managing the secondary risks. It is evident that risk assessment is a procedure of critical importance in any business.
Information and communication are the elements of system control that are responsible for quicker and better information conveyance. Although they are represented as separate parts of a system, information and communication are often working as a part of every other element while influencing each of these elements in different ways. With the increasing importance of information, it is hard to overestimate the importance of communication and reportings transportation in any business. Information and communication are related to other elements in the same manner as the control of activities which is the next element in controlling a system. It makes sure that every piece of financial information is represented authentically and reliable.
The last element of the system control is monitoring. It is somewhat self-explanatory because it means the monitoring of every other element in the system. Monitoring has a function of gathering the data on how well the elements operate, while also making sure that if any component fails to perform well, the required adjustments are set in place as soon as possible.
According to Dzomira (2014), the inability of any system to provide all of the control elements may, for example, lead to a possibility of fraud and other mischiefs. Having this fact in mind, one must always pay attention to every part of system control to make sure that their undertakings are functioning properly.
Another research performed by Mahadeen, Al-Dmour, Obeidat, and Tarhini (2016) is mainly focused on the Jordanian organizations. However, it provides an accurate assessment of importance that every system control element has. It is explicitly stated that “The organizational effectiveness is highly affected by the internal control systems component. This implies that organizational strategies should include enforcing the components of internal control to achieve effectiveness and gain competitive advantage” (Mahadeen et al., 2016, p. 35). Therefore, it is evident that system control elements are playing a bigger role in the process of making sure that any system is functioning well.
As a healthcare manager, I will always have to pay attention to the system control elements and that they are working properly. It will be my duty to collect data and perform the required adjustments in case if any element fails to operate as needed. I see my functions depending mostly on the effective monitoring of every process because it will allow me to control the environment in which the system control elements are functioning as a whole. Monitoring will also allow me to perform any needed risk assessment procedures in advance. Moreover, I will be able to ensure that the information that is required in my line of duty is processed correctly and delivered as fast as possible.
References
Dzomira, S. (2014). Internal controls and fraud schemes in not-for-profit organisations: A guide for good practice. Research Journal of Finance and Accounting, 5(2), 118-126.
Mahadeen, B, Al-Dmour, R. H., Obeidat, B. Y., & Tarhini, A. (2016). Examining the effect of the organization’s internal control system on organizational effectiveness: A Jordanian empirical study. International Journal of Business Administration, 7(6), 22-41.