INTERNAL CONTROL
- Refers to procedures or practices within an
organization to ensure that the organization
achieves the targets set in the strategy
- Uses resources economically and makes
sure that the information in support of
management decisions are reliable
Who is responsible for internal control?
- The primary responsibility for internal
control rests with management.
- The governing body is ultimately
responsible for ensuring that management
fulfills that responsibility. Independent
auditors, on the other hand, while they rely
on controls to support their opinion on the
fair presentation of financial statements, are
not responsible for internal control.
Who Assists Management with Internal
Control?
- Internal auditors and the audit committee
assist management and the governing body
What are the Five Components of the
Internal Control Framework?
1) a favorable control environment,
2) on-going risk assessment,
3) the design, implementation, and
maintenance of effective control activities
4) effective information and communication
5) an ongoing monitoring of the
effectiveness of controls.
Who is appointed by the CEO who bears
overall responsibility for organization's
operations?
- Executive Management Team (EMT), who is
appointed by the CEO, bears overall
responsibility of organization’s operations
being conducted consistent with strategy and
long term targets set by the board of
directors
3 Internal Control activities:
- Preventive- control activities aim to deter
the instance of errors or fraud.
- Detective- identify undesirable
"occurrences" after the fact; most obvious
detective control activity is reconciliation
- Corrective
Responsibilities of BOD when it comes
to Internal Control
- the board of directors is responsible for
organizing and maintaining adequate and
effective internal control. It deals with the
guidelines governing the company's internal
control.
BOARD OF COMMITTEES:
Types of Committees and Their Roles:
1) Standing Committee
(also called operating committees) are
those committees that an organization
uses on a continual basis. They can be
set forth in the organization’s bylaws or in
its board operations and policy manual,
or they may be established by custom.
Kinds of Standing Committee:
 Executive Committee: is usually
charged with oversight of the
organization’s chief executive officer;
 Audit Committee: selects the outside
auditor, meets with the auditor to
receive the audit report and
management letter, and discusses the
management letter with the full board
and the senior staff.
 Governance Committee: charged with
the care and feeding of the board
itself.
 Finance Committee: his committee
oversees the preparation of the annual
budget and the performance of the
organization in meeting its budgeted
revenues and expenses.
 Membership committee: tasked with
developing criteria for membership,
 credentialing members, overseeing Code of Conduct – states the values, rules,
elections, and developing and ethical principles, and vision for the business
delivering programs for members.
SANCTIONS: Penalty or fine, such as
 Program committee: charged with
destruction or withholding of property;
long-range planning and general
reimbursement, compensation, charges or
oversight.
fees; revocation or suspension of license;
 Ad Hoc Committee: Are formed for a
and, taking other restrictive actions by org
limited period to address a specific
need. When the work of the ad hoc COMMON SHAREHOLDERS’ RIGHTS
committee is completed, the
committee is dissolved. An ad hoc Voting Power on Major Issues
committee may exist for less than a
- Electing directors and proposals
year or for a year or more depending
- Takes place at the company’s annual
on the extent of the work assigned to
meeting
it.
- Can send proxy in case of absence and
Kinds of Ad Hoc Committee: email their votes

•Bylaws Committee is charged with Ownership in a Portion of the Company

reviewing the organization’s bylaws and
- Has a claim on a portion of the assets
current practices to ensure that they are
owned by the company
synchronized.
- Receive returns as the value of their
•Capital Campaign Committee an ideal ad shares increases as stock price arises
hoc committee. Its goal is to raise funds for
Right to Transfer Ownership
the capital campaign.
- Right to trade their stock on an
•Strategic Planning Committee responsible
exchange
for developing or updating an existing
- Liquidity- degree to which an asset
strategic plan for the full board’s approval.
can be quickly bought or sold in the
Duties: market without affecting the asset’s
price
Audit Committee
Entitlement to Dividends
- Ensure integrity of financial
information. - Profits can be: (1) reinvested back to
- Increase the emphasis on risk and the firm or (2) paid out in the form of
control. dividends
- Give director
Opportunity to Inspect Corporate Books and
Records

REGULAR REVIEW OF CODE AND - Requires companies to prepare their

SCOREBOARD FS into two reports for (1) Securities
and Exchange Commission and (2) to
Administrative Sanctions the shareholders
Corporate Governance Scoreboard (CGS) is a Right to Sue for Wrongful Acts
corporate governance rating system,
designed to raise the standards of corporate
governance practices of the GOCCs to be at
par with the ASEAN state-owned enterprises.