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Copyright of Science & Studies of Accounting & Finance: Problems & Perspectives / Apskaitos ir Finansu Mokslas ir Studijos: Problemos ir Perspectyvos is the property of Vytautas Magnus University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

One of the major state policy targets is to ensure the effectiveness and succession of activities of any organization, institution and company (further -- company). In order to achieve this target it is necessary to create an effective internal control system. According to the 315th International Audit Standard, internal control is an integral process that is effected by an entity's management and personnel and is designed to address risks and to provide reasonable assurance that in pursuit of the entity's mission, that the following general objectives are being achieved executing orderly, ethical, economical, efficient and effective operations, complying with applicable laws and regulations and safeguarding resources against loss, misuse and damage. However, most companies' managers do not pay enough attention to the internal control system, and some of them identify it as an internal audit. The effectiveness of the internal control system depends mostly on how relevant it was created and on whether the following main principles were observed: cost -- benefit, continuity, versatility, fairness, frequency, validity, compatibility, and flexibility. Therefore, to be effective, control activities need to: a) be appropriate (that is, the right control in the right place and commensurate to the risk involved) b) function consistently according to plan throughout the period (that is be complied with carefully by all employees involved and not bypassed when key personnel are away or the workload is heavy) c) be cost effective (that is, the cost of implementing the control should not exceed the benefits derived) d) be comprehensive, reasonable and directly relate to the control objectives It should be noted that an effective internal control system, no matter how well conceived and operated, can only provide reasonable but not absolute assurance to management about the achievement of an entity's objectives or its survival. An auditor should pay attention to all these elements, which should not be grouped according to their importance, work receptivity and other features. [ABSTRACT FROM AUTHOR]