CHAPTER ONE

          INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Firms are essential building blocks of any nation’s growth and development. As business units, it is natural for firms (no matter their nature and form) to experience risks and opportunities. What determines the survival rate of a firm is the set of mechanisms it has put in place to help maximize opportunities and to nip deviations in the bud.

These set of mechanisms imprinted in an organizational system of operations is in auditing parlance called Internal Controls.

Thus in order to understand the role of information communication technology in the development of an effective internal control system, it is important to completely understand the concept of internal control and its importance. In fact, according to COSO 2004, an effective internal control system is a sine qua non for a reliable Enterprise Risk Management.

The International Auditing and Assurance Standards Board defines internal control as, “the process designed, implemented, and maintained by those charged with governance, management, and other personnel to provide reasonable assurance about the achievement of an entity’s objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations.” However, this definition is based on the definition given by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

An enriched and broadened definition of internal control, taking into account some of the suggestions of IFAC’s Global Survey on Risk Management and Internal Control (2011), would be: Internal control is an integrated part of an organization’s governance system and risk management, which is understood, effected, and actively monitored by the organization’s governing body, management, and other personnel, to take advantage of opportunities and to counter the threats, in line with risk management strategy and policies on internal control set by the governing body to achieve an organization’s objectives through, among other things:

 executing effective and efficient strategic and operational processes;