Financial

control
Ades Kurnia 1802111911
Ivana Yustitia 1802112508
01 03
definition of Contextual factors
financial control

02 04
Comprehensiv Design
e control consideration
 01.
Definition of
financial
control
Mechanical feedback vs behavioural
responses
The primary focus in financial control subsystem is the behaviour
of an organization's people not its machine. For this reason,
financial control is best understood by emphasizing the
importance of behavioural assumptions.
In selecting financial controls, manager will rely on their beliefs
and past experience. The behavioural outcomes attributed to the
control initiatives are more realistically and accurately understood
in terms of beliefs and probability assesment rather than naïve
causal relationship.
 Extending traditional concepts

When designing control systems appripriate to the generation of accurate and reliable
accounting information, emphasis is traditionally placed on the following factors:

● Enganging personnel
● Avoiding incompatible
● Defining the authority
● Establishing a systematic method
● Insuring that documentation is adequate
● Safeguarding assets
● Designing independent checks
 02.
Comprehensiv
e control
 planning

Planning process is characterized in terms of goal-setting behaviour. The

planning process will raise control questions such as:

a b c
How will
How are divisons to What use will be departments be
be identified? made of structured and what
responsibility accounting will be
accounting? made for
interdepartmental
transfers?

operations
Operating control is the process of
monitoring and correcting operating
activities during the implementation of
management plant
Cont’d
feedback
Feedback is sought as the basis for making
evaluations that will influence the distibution
of rewards, the assesment of penalties, and
the alteration of the planning and operating
processes that generated the feedback
Contextual factors
 Contextual factors
The challenge for managers is to understand the most
dominant factors for the successful implementation of
financial control. The process of identifying cation of
important contextual factors is the highest subject and is
very temporary. All lists of critical contextual factors are
subject to do the overall improvement. ”Contextual actors
like
 SIZE

Size can be viewed as both an opportunity and an obstacle. Size is seen as an

opportunity if it serves as an economic benefit and not as a strategy. Size can
become a constraint if economic growth leads to manageability.

Environmental Stability

Control design in a stable environment may differ from control design in an ever-changing
environment. Stability in an exogenous environment can be judged by the force of movement
externally producing products requiring a response.
 Profit motive

The existence of the profit motive is certainly not a barrier to using assessment
measures, accounting for productivity. On the other hand, it is clear that control
systems based on motives and measures of profitability often cannot be translated
directly into a non-profit context.

Process factors

It is well known that process objectives for accounting controls can be an

important determinant of control design. There are many ways to characterize
organizational processes.
 The fourt of mention before is a difficult
and challenging process. The student of
control must rely on informed judgment,
experience, and sensitivity to identify the
critical contextual variables that govern a
particular setting.

Summary
Design
considerations
Anticipation of Logical
consequences
Anticipation of logical consequences
is a key element in designing controls.
This is important for a financial
manager who is accustomed to
making judgments based on whether
an outcome is good or bad. Financial
reports provide information to
determine whether these results are
correct. A control will relate to an
outcome or consequence, whether
appropriate or not, but control reflects
a behavioral consequence of a
specific control strategy.
Relevance of agency theory
Agency theory facilitates the
anticipation of logical consequences
by providing a logic for understanding
and subsequently predicting behavior.
An agent is someone appointed by the
principal to complete the tasks
assigned by the principal. The agent
may have a different set of outcome
objectives than the principal. The main
strength of agent theory is its ability to
provide a control design that
simultaneously helps to improve the
welfare of both parties.
MANAGING CHANGE
Managing change is an important
consideration in the design of controls.
Managers carry out controls to
achieve goals which are often faced
with a dilemma. The existence of
controls in a company may have
ceased its function when changes
occur, but managers are usually
worried about changing these
controls, even though it may be that it
will provide a greater opportunity to
achieve goals. compared to the costs
incurred for making these changes.
THANK
S

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