improving the internal control system in hoa hung trading and investment joint stock company

CHARACTERISTICS OF ORGANIZATIONS AND ACTIVITIVES OF HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY WITH INTERNAL CONTROL PROBLEMS...20 2.1.1.. system of control of financial experie

TABLE OF CONTENTS

ABBREVIATIONS LIST

TABLE LIST

ACKNOWLEDGMENTS

EXECUTIVE

Chapter 1: THE FUNDAMENTAL PROBLEMS ON INTERNAL CONTROL SYSTEM

IN BUSINESS 5

1.1 INTERNAL CONTROL SYSTEM IN THE MANAGEMENT SYSTEM 5

1.1.1 General Theory on the internal control system 5

1.1.1.1 General theory of control in management 5

1.1.1.2 The concept of internal control system 7

1.1.1.3 The purpose of the internal control system 9

1.1.1.4 The components of the system of internal control 10

1.1.2 The role and position of the internal control system for the management of enterprises 16

1.1.2.1 The necessity and benefits of the internal control system 16

1.1.2.2 The role and position of the internal control system for the management of enterprises 16

1.2 CHARACTERISTICS OF INTERNAL CONTROL SYSTEM IN HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY 18

1.2.1 The objective of internal control systems in Hoa Hung trading and investment joint stock company 18

1.2.2 Characteristics of the internal control system in Hoa Hung trading and investment joint stock company 18

Chapter 2: THE STATE OF INTERNAL CONTROL SYSTEM OF HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY 20

2.1 CHARACTERISTICS OF ORGANIZATIONS AND ACTIVITIVES OF HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY WITH INTERNAL

CONTROL PROBLEMS 20

2.1.1 The formation and development of Hoa Hung trading and investment joint stock Company with internal control problems 20

2.1.2 Production and business activities of Company with Internal Control System 22

2.2 INTERNAL CONTROL SYSTEM AT HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY CURRENTLY 26

2.2.1 Environmental Control 26

2.2.1.1 Management Characteristic 26

2.2.1.2 Structure 28

2.2.1.3 HR Policies 29

2.2.1.4 Planning, estimates and norms 36

2.2.1.5 Internal Audit Division 38

2.2.1.6 The external factors 40

2.2.2 The accounting system and economic information 40

2.2.3 Internal control procedures 46

2.3 REVIEW OF STATE OF INTERNAL CONTROL SYSTEM IN HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY 53

2.3.1 The results obtained 53

2.3.2 Some restrictions and cause 54

Chapter 3: THE ORIENTATION AND SOLUTIONS IN IMPROVING INTERNAL CONTROL SYSTEM IN HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY 57

3.1 THE NEED AND ORIENTATION TO IMPROVE INTERNAL CONTROL SYSTEM IN HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY 57

3.1.1 The need to improve internal control system in the Hoa Hung trading and Investment Joint Stock Company 57

3.1.2 Orientation in improving Internal control system in Hoa Hung trading and

investment joint stock company 58

3.2 SOLUTIONS IN IMPROVING THE INTERNAL CONTROL SYSTEM IN HOA HUNG INVESTMENT AND TRADING JOINT STOCK COMPANY 61

3.2.1 Improve the environmental control 61

3.2.2 Building the system of internal control rules strictly and synchronous 62

3.2.3 Change personnel policies in accordance with management mechanism 64

3.2.4 Organization of Internal Audit system under specific and concrete conditions of the Company 66

3.2.5 Organization of accounting system and economic science information 69

3.3 SOME RECOMMENDATIONS TO IMPLEMENT SOLUTIONS 71

CONCLUSION 74

REFERENCE LIST 75

ABBREVIATIONS LIST

1 AICPA American Institute of Certified Public Accountants

4 IFAC International Federation of Accountants

TABLE LISTS

Table 2.1: Results of business activities of Company (2005-2009) 21

Table 2.2: Structure of public officials and company employees 30

Table 2.3: Qualifications of the Company Labor of management in 2009 31

Table 2.4: Levels of skilled production workers in 2009 32

Table 2.2: Accounting organization on computer 43

During this course and complete my thesis, I have received guidance, great assistancefrom our teachers, all of people in my class With respect and grateful I would be deep toexpress sincere thanks to:

Faculty Training - International Trade University have created all favorable conditions tohelp me in my education background and complete thesis

All teachers of Commercial University and other foreign experts from Lyon3 University,most helpful, teach, encourage and create favorable conditions for me during the learningprocess to date thesis

Despite great efforts, but my thesis still has mistake, hope to receive sympathy andsuggestions of the teachers in marking thesis council

1 Urgency of the subject

Renovating and improving the efficiency of SOEs in general and limited company inparticular is the policy of the Party has been implemented for many years In the process ofinnovation present, management is one of the subject It is interested in business, especiallythe construction of a system of internal controls effective at the enterprise Internal controlincreasingly made clear roles and positions important to the management business is withlarge-scale enterprises

However we have many point of view about internal control:

1 First Concept: Auditing Guidelines International Council No 6 was the accountingUnion of Malaysia (Malaysian Assembly of Certificated Public Accountant - MACPA) andthe Institute of Accounting Malaysia (Malaysian Institute of Accountant - MIA) launched asfollows: "The system of internal control structure is combined with the measures andprocedures by the Board of an organization may accept, to support implementation of theobjectives to enhance governance ability to conduct business practices in order and efficiencyinclude: absolute follow the ways of the Board, protect property, prevent and detect fraud,mistake, ensuring accuracy , full current account data, timely and reliable financial data andinformation The scope of internal control systems also beyond matters directly related to thefunctions of accounting systems All personal principles of internal control systems as Duo'soperations and systems are understood as internalcontrol."

2 The second Concept: British Accounting Association (England Association ofAccountant - EEA) definition of internal control systems as follows: "A comprehensive

system of control of financial experience and different areas established by theManagementBoardto:

 Conducting business units in order and efficiency;

 Ensuring compliance with the absolute path of Board business;

 Keep your property safe;

 Ensure integrity and accuracy of accounting data, the individual components of thesystem of internal control are considered active examination or audit activities "

3 The third Concept : Institute independent auditing United States (American Institute

of Certificated Public Accountant - AICPA) defines internal control as follows: "Internalcontrols include the plan of the organization and all methods of distribution the measurementand recognition in the business to ensure the safety of their assets, check the compatibility andreliability of accounting data, enhancing the effectiveness of activities and encourage theimplementation the long-term management policies "

4 The forth Concept : the Federation of International Accounting (The InternationalFederation of Accountant - IFAC) is: "The system of internal control is the plan of the entireunit and methods, the working steps that the comply with corporate governance Internalcontrol systems help managers achieve the goals of certainty and order business effectively,including the respect of the management regulations; keep property safety, prevent detecterrors and fraudulent accounting records complete, accurate financial reporting timely,reliable "

5 The fifth Concept: In episode 2 Curriculum Professional Accounting University ofCanada: "The system of internal control is defined as a system of financial rules andregulations are not financial This system managed by the enterprise established to manage thebusiness executive order and efficiency Ensure respect for all management regulations, keepsafe assets, maintain records accounting regime fully and accurately the financial reportingdeadlines

So we can conclude all of concepts haves 2 general point:

The first is the internal control systems in an enterprise is understood as two parts: PartOne is the internal control mechanism should include full service mechanisms, processes,regulations and professional plus an organizational structure (including the arrangement and

distribution division of assignment, authorization, etc ) to make the operation of theenterprise is effective and safe The second part of the internal control system is the controland supervision of responsible, including internal audit to ensure that the operation of internalcontrol mechanisms mentioned above are strictly, there effective

The second is the internal control system will be attached to every part, every processand all professional staff in many small businesses will be involved in internal control andcontrol each other (rather than is only granted on the lower level control)

2 Reasons need to internal control?

In fact, management method of many companies still loose, while smaller companies

operates are the same family- management style, while large companies operates distribution rights for lower level without the fully tested Both these models are based onpersonal trust and the lack of regulation of information, cross-checking between the parts toprevent fraud Establish a system of internal control is established a monitoring mechanismwhere you do not handle with confidence, but with clear rules to: - Reduce risk of potentialrisks in business (errors inadvertently cause damage, slow the risk of the plan, increased costsand reduced product quality ), - Protect property from damage or loss, loss, fraud, fraud,theft - Ensure accuracy of accounting data and financial statements, - Make sure allmembers comply with company rules and regulations of the law, - Ensure use optimal use ofresources and achieve the set objectives, - Protecting the interests of investors, shareholdersand building trust with them

re-3.Scale of the thesis

Surveying Hoa Hung trading and investment joint stock company is business specialize

in investment and consultant production and sales of products with large-scale maps,characteristics for the whole army in particular, the country generally so the management here

is very difficult complex Implementation of the policy innovation, recently Surveying HoaHung joint stock company has been actively restructuring the Organization, to strengthenmanagement focusing to improve the system accounting and economic information, internalaudit as well as regulations and procedures to control the whole company But in reality

internal control system here is insufficiency, does not meet the requirements of management.

So perfect conditions internal control system current Hoa Hung trading and investment jointstock company is necessary in order to improve business efficiency and prestige of thecompany

4 Structure of the thesis:

The purpose of the Subject is a research system of reasoning about internal controlingsystem It includes the nature, purpose, and components as well as the role of internalcontroling system position of business management Through practical study and propose

specific solutions to improve internal controling system in Hoa Hung joint stock company

Chapter 1: The basic theoretical problem of internal controling system in the enterprise Chapter 2: Status of internal controling system at Hoa Hung trading and investment jointstock company

Chapter 3: Orientation and solutions improve internal controling system in Hoa Hungtrading and investment joint stock company

Chapter 1 THE FUNDAMENTAL PROBLEMS ON INTERNAL CONTROL

SYSTEM IN BUSINESS

1.1 INTERNAL CONTROL SYSTEM IN THE MANAGEMENT SYSTEM

1.1.1 General Theory on the internal control system

Internal control system is essentially a series of integrated activities, measures, plans,opinions, rules, policies and efforts of all members of the organization to ensure thatorganizational performance, achieve all manner of reason Can understand simply, internalcontrol systems is a system of all what an organization needs to do to get or avoid what it wants.Base on this principle, the management systems of different international standards such as ISO,TQM, QA / QC to ensure the effective operation of an organization that has been built

1.1.1.1 General theory of control in management.

In relation to organizational structure, management has an impact on the organization,with the aim use the most effective of resources to achieve identified goals set The subjecthere is the management structure of the unit, including leading cadres at all levels anddepartment of professional staffs who implement management and administration units.Object management is people and things, the phenomenon occurred in the unit Objectmanagement has different characteristics so in the process by which management also appearthese complex issues at varying degrees Management objectives of the unit are following amanagement process to measure and quantify the results that the unit must be oriented in acertain period of time

The whole process of management includes two main stages: the directions stage andimplementation stage of the directions given At each stage, control functions are important asit's always showed the actual level of management To achieve the proposed plan,implementation process should be respected in the whole process of management

Organization made here including from the application of these guidelines, the order has beenoriented to the efficient use of resources available In this stage the manager must use theskills of their executive to manage, direct and coordinate all the departments Completedresults are reported and compared with the objectives set out in the plan From these results,managers can examine, evaluate and adjust activities as appropriate to achieve objectives in abetter way

At the directions stage, should be oriented forecasts and target resources, at the sametime check all information about resources and objectives, develop programs and plans .After the plan has been under control, we can give specific decisions

At the implementation stage of the directions, need to combine the resources underoptimal, regular inspection and control process and results of the process to reconcile therelationship, adjusting entries criteria to achieve optimum results

Thus, controlling is monitoring activities to ensure that these activities be carried out asplanned This process includes three different steps: measuring the performance, comparingactual results with a certain standard and take action to modify incorrect or inconsistentstandards An effective control system is to ensure that all operations are completed in order toachieve the objectives of the organization

Under this definition, control is not a phase or a stage of process management but it isimplemented at all stages of the management process Thus control can be understood as afunction of management However this feature is also displayed very different depending onthe economic mechanisms and management level, on specific types of activities, the culturaltradition as well as socio-economic conditions of each place in each specific historical period

In general, control can be classified into direct control and overall control

Direct control is the procedures; controlling regulations are built on the basis ofevaluation factors, the component management system Direct control includes three basictypes: behavioral control, process control and protection control

Behavioral control is the control of individual activities by employees and who performindependent activities conducted This is relatively effective measures to detect and preventfraud, mistake An effective control system will help entire job to reduce

Process control is the capture and settlement of transactions or through our work whichtransactions are recognized, allowed classifying, calculating, recording, synthesizing andreporting In cases, information is processed by computer systems; the control process isimplemented through function by computer

Protection control is measures, control regulations to ensure the safety of property andunit information The key aims include:

Firstly: The division of responsibilities to protect asset, particularly allocation ofresponsibilities with the responsibility to records of assets and restrict the access of peoplewith no direct responsibility for assets and records of unit without permission of the manager.For example: To issue and implement regulations to control the inventory, the maintenanceregulation and repair of property and control of accounting document reference, data storage

in computers

Secondly, the safety system: For example, warehouses, fire-proof safe, alarm system,alarm, installs code to access information, etc

Thirdly, The stock- taking and certification by third parties:

Overall control is the overall control system for many systems, different jobs In thecomputerization of environmental management at high level, overall control functions of thecomputer room Want to review controls in this case must use the expert knowledge ofcomputers

Thus, through theoretical research on the control of management, control can be seen as

a function of management, associated with management, where there is a management so that

is control The more highly developed society, the greater manageable role, manageablecontent is more complex, so management requires much more in control However,management and control functions in the management are complex so requiring not onlymanagers have sufficient knowledge and skills in industrial production but also be dynamic,sensitive, understand the international situation to have suitable decisions on the subjects of

management to achieve the target

1.1.1.2 The concept of internal control system

In every business, monitoring- control role is important for management This function

is carried out by internal control system of the business

According to the International Federation of Accountants (IFAC): "Internal controlsystem is a system of policies and procedures to control:

+ Protect the assets of the unit, avoiding loss, drain or damage

+ To ensure reliability of accounting information, avoid errors and fraud in therecording, combining accounting document

+ Ensure the implementation of the legal regime, ensure abidance with proper rules andregulations relating to legal business activities of enterprises, and avoid the violation lead tosuspicious relations in financial operations

+ To ensure effective operation and management capability Avoid wastage of financialresources and develop to maximize capacity of staff and the rank of management in the unit Accordingly, internal control is a function constantly of the units and organizations onthe basis of identified risks can occur in each stage of work to find preventive measures toimplement effective all objectives of the unit:

The first is the unit's assets must be protected Property here can be invisible, visible,can be material or immaterial They can be stolen, misused different purposes or damaged if it

is not protected by the compatible control systems

Secondly, the information must be reliable Information is important bases for theestablishment of management decision So the information provided to ensure timeliness, theaccuracy and reliability about real situation of activities at the same time fully reflectobjectively the main contents of economic activity and financial

Thirdly, ensure the performance of the legal regime Internal control system designed to

ensure decisions and legal regulations related to business activities of enterprises must observeproperly

The fourth, Ensuring effective operation and management capability: The controlprocess of unit is designed to prevent unnecessary repetition, causing lead to waste in theoperation and inefficient use of resources In addition, periodically managers usually reviewresults in business activity which is done by a monitoring mechanism of internal controlsystem enterprises to improve management and administration of enterprise

Four goals are unified, but sometimes also in conflict with each other Responsibility ofmanagers is to build an effective internal control system and harmonious combination of four goals Thus, the conclusion concept of internal control system as follows: Internal control systems are all policies and procedures to control unit established to ensureefficiency and effectiveness of the activities in the unit, ensuring compliance with regulationsand legal units laws of the State ensure the reliability of information and protection of assets ofthe unit

Policies and control procedures here apply to all activities of the unit So extent ofinternal control system in relative extensity, which covers all activities of an organization frompersonnel to business, finance and accounting, from small parts as teams, departments tolarger organizations such as companies or corporations

1.1.1.3 The purpose of the internal control system

Internal control system is primarily due to the construction of management unit to servetheir managing purpose When setting up and operating an internal control system, businessmanagers always towards the goal line available According to the definition of IFAC so thepropose of internal control system is pretty obvious Combining the views of differentorganizations, we can see the purpose of internal control system is shown on the following points:The first is: Administrating and business management effectively Regulations as well ascontrol procedures must ensure the work is done quickly, efficiently, preventing unnecessary

repetition of the operation, avoidance of waste in production processes lead to use resourcesinefficiently

Second, make sure the regulations and the management procedures are implementedproperly

Managers often do business through their own decisions and managing rules Internalcontrol system will control the level of efficiency all decisions implement in the process,ensuring observing with procedures and formalities have been properly defined

Third: To detect problems in time business to plan and implement countermeasures Activity in the market economy with fierce competition makes the inevitable difficultiesand problems in the production process Internal control system through its chain isresponsible for discovery of the difficulties and problems, from which the appropriatecountermeasures

Fourth: to detect, prevent errors and fraud in business Errors during production andbusiness activities are inevitable, unavoidable due to reasons both objective and subjective Allstages in the operation were carried out by employees in units They may have completely thewrong committed, even fraudulent personal purposes In order to detect and prevent errors andfrauds, we need to have internal control system with tight stages

Fifth: We need to record accounting sufficiently, reliability and correct understanding ofthe professional and business activities The recognition of business activities through theaccounting work is not always complete and properly regulated By setting the processes offinancial management accounting systems to provide data and reports, internal control systemwill help to keep accounting records and financial statements to ensure compliance withregulations

Sixth: Protection of information assets from being abused or misused purposes

Property and business information are things that can be stolen, lost or abused In the marketeconomy will be very dangerous if the information fall into the hands of competitors.Therefore internal control system purpose is to protect assets and information through itscontrol process and limit the maximum losses for the unit

1.1.1.4 The components of the system of internal control

In the opinion of IFAC as well as the Association's Certified Public Accountants USA(AICPA), Internal control system includes 3 basic components: control environment,economics information systems and control procedures

Control Environment includes all the elements which are environmental temperamentimpact the design of policies; affect all control operations as well as the effectiveness of thosepolicies in the unit

These factors are mainly related to the attitudes, perceptions and actions of themanagement unit So we have a very important role in internal control system units Thesefactors are environmental characteristics, it often includes:

First is: Characterized management

Specific management is proved by perceptions, attitudes of managers in operatingactivities of the unit

These views directly influence to the policies, regulations as well as well as inspectionand control in units Some managers, who attach much importance to profits, emphasizing thecompletion of the profitable plan, always ready take risks to achieve goals In contrast someother managers are very conservative attitude and cautious, afraid of risk and therefore maymiss opportunity in business These different views of executive management lead todifferences in formulation and application of policies and control procedures

Specific management is also proved by the power structure or power distribution in unit

In some units, the management was centralized and dominated by an individual In this case,quality and capacity of centralized power has greatly influenced policies and controlprocedures By contrast, in some units, power is distributed to many people in the

management organization There are important issues using the power of those who have right

by using the proper rights assigned, to prevent abuse of this power

Second, the organizational structure

In fact the organizational structure of a unit is the division of powers between themembers of the unit A rational organizational structure will ensure that the units operatesmoothly and efficiently, able to prevent the violation, eliminate the inappropriate activity maylead to errors, frauds In contrast to the lack of logical structure will lead to wastefulduplication or omission or negligence irresponsible, since it likely violations Thus theorganizational structure itself of the units also greatly influenced to policies and controlprocedures in the unit

Third: Personnel policies

Personnel policies include all policies and regimes of the units for the recruitment,evaluation, promotion and discipline reward employees The recruitment, training and staff,promote the appropriate personnel with professional qualifications, ethical qualities at thesame time succession and continuity considered a suitable personnel policy People alwaysplay a decisive role in the management process, thus personnel policies have a significanteffect to implement policies and procedures for control of the unit All policies, procedurescorrectly is also not effective when personnel unit at level weaknesses, moral degradation anddecline in morale Conversely an effective human resource policy will make policies, controlprocedures are observed seriously, limited to the minimum errors

Fourth: The Plan

Including a system of plans and estimates as production planning, sales planning,financial planning and projects, strategic plans of highest management part, the plan will helpoperating unit’s right direction and efficiency Periodically, Units compare real achievementwith target in plan, since than we have measures adjustment timely So if plan work is carriedout seriously and scientifically, it will become effective control tool In addition, it help unit to

detect, prevent errors, frauds in the production activities of its business

Fifth: Internal Audit part

Internal audit part provides supervision and regular evaluation of all activities of theunit So it is a factor of environmental control An effective internal audit will help units gettimely information about operating status in general, control quality in particular, so thatadjustment, additional procedures, suitable controls rules more efficient However, onlyinternal control part can promote efficiently when it is directly under the top management isenough not limit the scope of its activities Besides, it must be given relatively strong powers

to ensure the relative independence of internal audit part with parts to be examined Inaddition, internal audit department must have staffs that have enough sufficient capacity andqualifications to perform their duties

The sixth: Control Committee

Control Committee typically range from 3 to 5 members of the board play the role ofoperational supervision of the unit from the observance of national laws to the specific task ofinternal control in units These members usually are not officers or employees of the unit toensure objective independent The independence and effectiveness of the Committee is all ofimportant factor in environmental control

The seventh: external factors

Excluding these factors mentioned above, environmental control still consist externalfactors These factors beyond the control of unit managers, but it have great influence to theattitudes, behaviors of management and regulation, specific control procedures Group factorsare generally: the impact of State agencies (tax, customs, financial, statistical, treasury ),creditors and relative liabilities

The accounting system and economic information mainly accounting system of unitsinclude accounting voucher system, accounting system, accounts systems, balance sheet.Through observation and comparison, calculate and record the arising economic operations,

accounting systems not only provide necessary information for the management but alsocontrol many aspects of the operation unit By recording all import-export events of assetsbased on the valid document so accounting help protect assets of units, avoid fraud or wastefuluse Accounting also performs pre-surveillance activities in many areas such as supply units,production or consumption by recording, calculation and analysis of business results foreach period An effective accounting system must ensure effective implementation ofcontrolling target such as the truth, suitable approval, sufficiency, the evaluation calculationexactly, timeliness The accounting system is an important element in the system of internalcontrol units, which are demonstrated through control of accounting systems

Accounting system is the system used for recording, calculating sort, transferred to thegeneral ledger, combine all of accounting event arise The accounting system of the unitincludes four elements: Accounting record system, accounts system, account book system andaccounting report system

Accounting record system includes compelling accounting document system and guideaccounting document system It was established to record economic operations arising as alegal basis for the figures on the account, accounting and accounting reports

Accounts system is an important component of the accounting system of enterprises.This system includes an account-level and second level to reflect the economic activitiesarising which belong economic typology and other economic sectors in accordance with therequirements and characteristics of market economy in our country today Account booksystem including a lot of kinds, a detailed accounting, general accounting, book structure, therelationship test for comparison between the accounting, order and recording methods as well

as synthesizing data for reporting Such accounting system is used for recording, systematizingand synthesizing data from the accounting documents as a sequence and recording methodcertainly

The accounting report system reflects a general, comprehensive situation assets,liabilities, capital, situation and result from business of units in a public accounting

Through observation and comparison, calculate and record the arising economicoperations, accounting systems not only provide information for management but also controlmany aspects of unit operations Therefore, the accounting system is a chain, an importantcomponent of internal control system

The Control of the accounting system is demonstrated through three phases of theaccounting process that is: Make the accounting record, account books reflect on (includingledger and subsidiary ledger accounts) and set accounting reports

Prepare accounting records is the first stage of accounting data processing This is a veryimportant stage, the preparation of the full document, valid, legal and faithfully reflects all theoperations arising new accounting data to ensure the accuracy and reliability Through theperiod set up document, accounting can check, detect and prevent errors in the operationsarising, asset protection, and use of resources of the unit efficaciously Reflected in accountingbooks are the main stages in accounting data processing Here all operations arising will berecorded, computing classified, synthesizing into the accounting books Accounting bookssystem is a very important role in internal control system The book details on materials andgoods, debts will help managers collect reliable information for making decisions onoperating units In addition, accounting also helps to synthesize, store information science andsystems, are intermediate between the original documents and accounting reporting systems,

so it is the basis for inspection and compare documents Prepare accounting reports is the finalstage of the process accounting information in order to assemble data on the accounting books

of the indices on accounting reports Information shown on the accounting reports are notsimply carried over from the accounting books that it must faithfully reflect the financialsituation and results of operations of the units must be presented simultaneously in accordancewith accounting standards and related regulations

Internal control procedures are the way, the operation in management procedures Toachieve the control objectives, managers must establish and maintain the steps as well as how

to control the unit They are designed depending on the characteristics of each unit Therefore,the steps to control and how to control can differ, even very different between types of units

Second, the principle of concurrent

This principle requires the separation of powers and responsibilities for certain tasks asthe responsibility to carry out the responsibilities records; responsibility to preserve propertieswith responsibility accounting entries; Accountability responsibility of approving the recordbooks, the accounting function with functional finance function to perform control functions,etc This principle derives from the special relationship between the concurrentresponsibility easily lead to fraud difficult to detect Even some responsibility not only or nolonger required but not concurrently with another family For example, accounting work part-time cashier can lead to embezzle public funds and amending accounting data to mask thedeficit; Storekeeper accounting work part-time warehouse easily lead to errors and fraud indata import, export or stock

Third: Principles of authorization and approval

According to this principle, the management unit can not solve all of the work in theservice unit which must be authorized to grant under management on behalf of the unitdecided to work in a certain range However, the unit manager is responsible for that job andstill maintains a specific inspection Authorization process is to continue to implement thelower levels to create a system of divided responsibilities and powers between different levelsbut to ensure the focus of the unit Ratification is a manifestation of the specific decisions and

to solve a task within the assigned powers

Principles for authorization and approval of business requirements arise are authorized

to approve the staff appropriately

Besides the above basic principles, the control procedures also include provisionsvouchers must be full of books, material and process control over the assets and records andindependent control of the implementation of activities of the units

1.1.2 The role and position of the internal control system for the management of enterprises

1.1.2.1 The necessity and benefits of the internal control system

In any organization, unity and common conflicts of interest - the interests of privateemployers with laborers always exist together If no system of internal control, how theworkers are not their own interests that do the damage to the common interests of allorganizations of the employers? How do I manage risks? How can decentralization, proxy,assigning subordinates too accurately, scientifically

An internal control system will bring strong organizational benefits such as: Reduce therisk of potential risks in the business (errors inadvertently cause damage, slow the risk of theplan, increased cost, and reduced product quality ) Protect property from damage, loss byloss, fraud, cheat, steal Ensure accuracy of accounting data and financial statements Ensureall members comply with rules, regulations and operating procedures of the organization aswell as the provisions of the law Ensure efficient organization and operation, optimal use ofresources and achieve the set objectives Protect the interests of investors, shareholders andbuild confidence in them (cases JSC)

1.1.2.2 The role and position of the internal control system for the management of enterprises

As we all know, managing is the impact of organized, oriented of the managementsubject to the management object with the aim to effective use of resources identifiedeffectively The impact depends greatly on management tools as well as the organization's

process management leaders To be a management unit, a business, managers must have theirtools at the same time make the order, the steps to control the activities of the unit All thepolicies, rules, regulations and other procedures designed to control the operations of the unitback sides of internal control system

Thus, we can say internal control system is very important role in the management of thebusiness To manage the business, should have internal control system Where there is nointernal control, there are no managers with full meaning of this notion

A strong internal control system helps enterprises reduce risk, fraud or theft by thirdparties or employees causing the company to ensure reliability of accounting data andfinancial statements, to avoid the risk of human error may harm the company In suchconditions, failure to comply with policies and business processes of the company alsoreduced at the same time contribute to improving business efficiency across the enterprise

In summary, effective internal control system will help manager’s better operating activities inthe unit Conversely a poor performance internal control system makes the operatingdifficulties, the manager can not control the activities occurring in the enterprise, and of coursethis will affect directly to results production and business activities of enterprises Therefore,internal control system in enterprises occupies a very important and vital for the management

of the business

With the role and position as such, increasingly internal control system is more and moreinterested in the enterprise management attention In developed countries have high levelmanagement, internal control system it very seriously In a company or a corporation, internalcontrol system be built in a scientific way is the key to success in management When thescale was extended enterprise, object management become more complex as the internalcontrol system affirmed the necessity of it In Vietnam, since the switch to market economysocialist orientation, many businesses have recognized the role of internal control system.Leaders of businesses, large companies have the sense to build an effective internal controlsystem in their units Awareness of the general managers, business leaders in particular on therole and position of internal control system has shifted toward the positive From here willlead to substantial improvement in the management run by the role and position of internal

control system confirmed and recorded

1.2 CHARACTERISTICS OF INTERNAL CONTROL SYSTEM IN HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY

1.2.1 The objective of internal control systems in Hoa Hung trading and investment joint stock company

The first, ensure that all of enterprises must to observe the laws of the State, thecommand, rules and regulations of each enterprise Prevent the phenomenon of violation ornon compliance, the business processes and techniques

Second, ensure that the activities of each enterprise to be deployed right direction, theresources are used efficiently, the organize measures implement in accordance withappropriate procedures, effectively

Thirdly, safeguard all assets in each business, equipment and technical coefficients usedwell, enhance and ready fulfill all tasks assigned

Fourth, organize information system in each particular enterprise accounting system andeconomic information The information system is best served for decision making at all levels

of management in all cases

Fifth, through the control of unreasonable discovery in stages, from whichrecommendations to the competent authorities, the authorities amended, supplemented or issuednew regulations aimed at strengthening better management, strengthen measures to ensure thesafety of property, weapons and equipment, improve operational efficiency in all areas

1.2.2 Characteristics of the internal control system in Hoa Hung trading and investment joint stock company

A noticeable feature is Hoa Hung trading and investment joint stock company operationsnot fully comply with the rules of market economy The success of Hoa Hung trading and

investment joint stock company is not only measured by business performance and economicnorms, but also also depends on the assigned plan Therefore, the focus of the internal controlsystem in Hoa Hung trading and investment joint stock company is not only strictly controlled

to minimize costs and maximize profits but also generally considered structures, the theactivities to be better able to complete the specific tasks of a firm

Environment characterized by such activities should be implementing internal controlsystems in Hoa Hung trading and investment joint stock company is difficult, especiallywhen the implementation of the orders have been delivered to the effects certain internalcontrol policies of the business Therefore, a change in policy to make the system of internalcontrol of Hoa Hung trading and investment joint stock company becomes more flexible andcan adapt to suit the situation and create conditions for civil servants and defense workersconditions adapted to the conditions of production and other workers On the other hand, thechange in this policy requires management costs as well as implementation costs and requireslarge businesses to have time to adjust to new conditions and circumstances It can be seen aschallenge for Hoa Hung trading and investment joint stock company

Therefore, the internal control in a scientific way periodically, and make regularcontinuity is essential In parallel, Hoa Hung trading and investment joint stock comapymust also improving internal control is a really proactive flexibility to be able to fulfill therequirements that the Defense Department launched

2.1.1 The formation and development of Hoa Hung trading and investment joint stock Company with internal control problems

Hoa Hung Trading and Investment Joint Stock Company was established under Decision

No 09/QD - QP dated 09/01/1990 of the financial and operating under the regime ofindependent accounting, have legal status, using seal for economic transactions

Starting from 1990 from a small workshop specializing in the sale of tables and chairsfor rural students and suburban of Hanoi, operated by Mr Doan Nguyen Duc Until now, HoaHung trading and investment joint stock Company has achieved strong progress and becomeprivate corporations operating in many different fields The representative office wasestablished in some provinces in order to facilitate customers can access and transactions with

a convenient and quick In addition to maintaining and expanding export markets, Hoa Hung

is developing in domestic market, produce and supply all kinds of terrain data for the nationaldefense and security, combined with the defense on the economy range of domestic andinternational

In recent years, Hoa Hung trading and investment joint stock Company has developedrapidly Here are some indicators of economic, financial companies gained in the last 5 years:

Table 2.1: Results of business activities of Company (2005-2009)

Speed of Development 2005-2009 Sales revenue Million Dong 167,047 170,826 195,464 217,482 227,673 136.29%

Total profit after tax Million Dong 4231 4376 4995 5582 5864 138.60%

Total assets Million Dong 147,931 159,533 174,647 185,784 199,644 134.90%

Owners' capital Million Dong 53,983 51,464 53,657 54,287 54,986 101.86%

Average labor

productivity

Million Dongper person 169.25 165.53 182.68 201.56 203.10 120.00%

Source: Finance and Accounting Department of Hoa Hung Company

This period marks the important shift of the Company; the Company is activelyorganization of the entire production process from planning to distribute all the units in thewhole company With the mission and nature of new business, previous management modelproved unsuitable and start showing its limitations Company leaders realized that ICS(Internal Control System) does not help the company business autonomy in the newmechanism in order to satisfy the needs of management: From accounting systems toregulations , procedures for internal control, issues related to the general controlenvironment all be reviewed and adjusted accordingly Of course to build a business ICSsuit is not just one day, but here shows the change in the perception of the Company for theinternal control unit Especially in recent years, the company’s products have been diversified;business management requirements become increasingly complex, the need for an effectiveICS become more urgent than ever

Thus, through nearly 20 years since establishment, at each stage of development have

different characteristics, associated with the historical mission of the company The formationand development of the Company as well as the process of organizational development,personnel Associated with the construction and operation ICS In the process, the companyhas repeatedly changed the rules supplement, ICS review to meet development requirements

of the Company in each period Therefore, research and complete construction in ICSCompany is asking customers to actively move the operations of the company to new level

2.1.2 Production and business activities of Company with Internal Control System

Hoa Hung trading and investment joint stock company operating in many business areas,but here we only consider this company in the field of investment, production and businessdevelopment maps and topographic data in accordance with military planning anddevelopment plan of the Ministry of Defense and State Business activities of the company isnow measured data providing terrain, geodetic surveying, engineering geology, mappingtypes, building a database information system geographical (GIS) research and development,technology transfer maps and geodetic techniques relevant technology in mapping and otherproducts on the materials with precision and aesthetic ; business importing materials,equipment surveying maps, repair and maintenance services assembly surveying, computerand mapping equipment These are important tasks and can not be any shortage in the drillsand protecting the country in particular and contribute to economic development of thecountry in general In addition, the company also made a number of other tasks assigned bythe Defense Ministry and the State

ICS in Hoa Hung trading and investment joint stock Company has its own particularcharacter based on the characteristics of the object produced This reflected mainly thefollowing points:

One, Business of production and trading maps and topographic data type for national

defense and security, combined economic with defense within the domestic andinternational This feature requires ICS must be built closely to ensure compliance with verystrict procedures, code of measuring, publishing, printing, logistics, transportation and

storage On the other hand, this product requires high precision and absolute confidentialitybecause it is the property nature of national security, so ICS should be built strictly and unitedapplication throughout the company.

Second, the company also provides services measurement, providing topographic data,

geologic survey geodetic works; mapping types, building a database of geographicinformation systems (GIS) research and development, technology transfer geodetic maps andother related techniques The production of this business has a wide range of localities acrossthe country, closely associated with various levels, departments and has manycharacteristics So the management machines of the Company and the member units are bulky,multiple intermediate levels ICS must be built based on these characteristics, organizationalstructure and personnel policies must adhere to the characteristics to ensure that managementdecisions be followed quickly and synchronously

Third: With the field of printing technology in maps and other products on different

media types, with accuracy and aesthetic as well as a manufacturing business is very

"sensitive" to the economy All the fluctuations in price or supply of its production are directlyaffected by the economy and other sectors So, other than those normally found, products ofprinting directly under the management and publishing license of the Ministry of Informationand Communication Therefore the quantity, quality and price of such publications as themarket decide Control the prices, control production and balance are sold to buy into work

is extremely heavy for ICS Features that require the management to build the rules andregulations on the management of production printing products, procedures and supervise theimplementation of regulations issued The organization must have mechanisms to coordinatedifferent agencies, particularly between the licensed trade publishers to control prices andquality goods

Four: With business in importing materials, equipment surveying maps, repair and

maintenance services assembly surveying, computer and mapping equipment, the company

faced many difficulties due to being directly affected by prices of raw materials, supplies,equipment surveying the world These are found relatively specific and influenced thedevelopment of scientific and technological world Therefore, there must be a sufficient ICSlimited to the minimum risk There must be special emphasis on forecasting, prevention, andthe price mechanism is very flexible The main characteristics of this phenomenon easily lead

to speculation and market manipulation So there must be strict regulations on production andbusiness management, having control of imported materials and equipments, quantity ofmaterials and equipment inventory, ensuring adequate supply for the needs of productionbusiness, but against the hoarding situation as market disruption This feature requires ICSmust have rules, inspection and control process very closely Besides, there must be strictsanctions to handle violations, limit fraud in business, affecting the reputation of the Companyand the member units

Thus, in order to complete this task requires the Company to have a mechanism forinspection, monitoring actual performance The various business types, each type has its ownspecific characteristics Thus the management and smooth operation of activities in thecompany is not that simple ICS in general, the rules in particular must be controlled closely tobuild and implement strictly and synchronously However, internal control issues at thecompany today is still generally weak, failing to meet management requirements necessary tocomplete the change in the future

Implementation strategies varied selectively found, business, company size increasinglyexpanded the types of businesses are increasingly diversified With the functions, tasks andtypes of activities as above, at present organization machine of the company is arranged inseveral levels from company to workshops, the production teams of the member units So tomanage and operate all activities in the company properly requires a relatively strong ICS,designed to build a basic science Obviously, ICS must adhere to special views on thefunctions of the company; the organizational structure must be well designed and operated toensure the smooth operation in the whole company

Thus it can be seen the highlighted features affecting the Company’s ICS expressed by

the following key aspects:

One is: Characteristics of business tasks.

Company in business mapping and terrain data is subject to the military strictlyregulated by the Ministry of Defense on price, quantity, quality and time efficient production

of unknown course, depends on mechanisms, policies and regulation of the Ministry ofDefense should not create pressure dynamics as well as companies striving to renew and raisecompetitiveness

The company's mission is to organize business activities in their respective military unitsacross the country, expanding until the remote areas; quality management staff is notuniform This causes difficulties in training, planning staff; problem gathering and processingaccounting information is limited; the rules, issued late in writing executed; ICS hard topromote effective

Second, the functional characteristics of business

Besides the main business is producing maps and topographic data military, thecompany also does business in many other fields Diversification of products and businessmakes the construction and operation of ICS faced many difficulties Every field ofmanagement have issued internal management mechanism, but because the units are differentmarkets, business conditions, the structure of the organizational structure, capital size, level ofmanagerial staff, etc so the mechanism of internal management generally fall into one oftwo states: Either no specific or too detailed Therefore, although all fields have their ownrules, but the implementation is limited and have not achieved the desired effect when issuedregulations The company finds difficult in giving close steps of control and can not applystrong sanctions because each unit, each business field has very different characteristics

Third: Characteristics of organizational management

With the current organizational model: cumbersome with intermediate levels Therefore,awareness of ICS for each level of management of the member units is completely different

So when implementing management decisions, the internal control regulations often take a

long time and can hardly implement in schedule.

Thus, functions and organizational structure have close relationship with ICS inCompany, a base to design and operation ICS To check and control efficiently all activities,control rules, procedures, control procedures must be established based on the characteristics

of functions and characteristics of organizational structure Conversely, from the troubles inthe design ICS, from the inefficiency in the control rules, can adjust the organizationalstructure most appropriate and effective This relationship was not explored and utilized by theCompany This caused ICS not actually strong, not promote efficiency in management

2.2 INTERNAL CONTROL SYSTEM AT HOA HUNG TRADING AND INVESTMENT JOINT STOCK COMPANY CURRENTLY

2.2.1 Environmental Control

2.2.1.1 Management Characteristic

Hoa Hung Trading and Investment Joint Stock Company is a enterprises have legalstatus, perform accounting independent economic accounts, its own seal and the unit has 07members dependent economic accounting

Currently in the company, the highest executive authority is director Nham AnhHung Director who has over four years with industry surveying and cartography, as childrenare growing up in the revolution He has gone through many different positions so that allactivities at his company are very knowledgeable This is very convenient for the executiveposition of his company During his time working here, he understood the difficulties that thecompany faces in each stage and recognized the need for change He attaches great importance

to human factors and determine the factors influencing it directly to the quality of managementdecisions on the development of the Company Building an ICS of the company in order tooperate smoothly and efficiently is what he always thinks

Based on the views and perceptions of the Company on the management in general andICS in particular, concrete actions have been implemented First board to conduct a review ofall documents issued before 2000, additional editing suit the new situation Every kind of newregulation was created as: quality management system ISO 9001-2000 (issued together withDecision No 249/QD-CT on 26/04/2005) Regulation salaries, pay bonuses (issued togetherwith Decision No 267/QD-CT on 07 / 4 / 2006); the standards of professional assistants,technicians and professional (issued together with Decision No 482/QD-CT on 03/7/2007)Financial Management Regulations (issued under Decision No 501/QD-TC on 06/30/2006)technology labor norms of geodesic map (issued together with Decision No 719/QD-CT dated29/09/2006) HR Policies of the Company has also changed significantly, many youngofficers have been appointed to important positions in all the departments Assigned qualifiedyoung staffs to study improving their professional skills in some developed countries likeFrance, Poland and Russia The company always creates favorable conditions for all staffmembers have academic qualifications to participate in improving the level of trainingdoctors, masters, engineers, bachelor degrees at major universities in domestic Besides everyyear the company has opened training courses for professional staff and technical staff of themember units Understand more than anyone else the importance of human resources in theprocess of existence and development of the Company, the Company's board of directorsalways have a strategy to build and develop long-term human resources.

2.2.1.2 Structure

The organizational structure of the current corporate model layout as follows:

Deputy Director of the Southern Branch

Deputy Sales Manager - Engineering quality cum representative

Deputy Director

of Politics

Deputy Director

Finance and accounting Department

Computing Terrain Department

Adminis

- tration

Office

Labor and Wage OrganizationOffice

General Planning Office

Product Quality control Office

Surveying Factory

Aviation

Photography

Factory

Technology Development Surveying Map Factory

Surveying Map Services Factory

Map 1 Factory Dalat Map Factory Southern Branch

Political Office

Internal Audit Division

29

At the company includes:

+ Board of Directors

+ General Planning Office

+ Product quality control Office

+ Computing terrain Office

+ Finance and Accounting Department

+ Administration + Management Office

+ Politics Office

+ Labor and Wage Organization Office

+ Audit Division

Units of the Company:

+ Aviation photography Factory

+ Technology Development Surveying Map Factory

+ Surveying Factory

+ Map 1 Factory

+ Dalat Map Factory

+ Surveying Map Services Factory

+ Branch at 18 Bis, Cong Hoa Street - Tan Binh Dist - Ho Chi Minh City

Current organizational structure of the company today has not really suitable, not totake advantage of capabilities and intelligence of the management staff at the unitmembers This structure will be very difficult to control the enforcement of regulations andpolicies issued in the member units This makes parts for the implementation of policies ofirresponsible negligence, easily lead to mistakes This is also the cause of great influence tothe effectiveness of the policies, rules of internal controls at the company nowadays

2.2.1.3 HR Policies

Human resource development to meet the timely needs of business in each period isalways a task of the Company is concerned Up to now, the total number of employees of

the Company up to over 1,000 people

Table 2.2: Structure of public officials and company employees

Da Lat Map Factory

Surveying Map Services

Southern Branch

Total

48506255120127247224182136230

986

410607255120127255239195139250

1031

410649255110132261237211146270

1070

41167925610010719816022414126163

1079

512681024610411920216423214225170

1121

Source: Report of labor, wages, income of Company (2005 - 2009)

About the quality of labor:

- Management Labor with high level (postgraduate is 11.98%, university degree is52.07% while the elementary level is only a small percentage of 14.88%)

Table 2.3: Qualifications of the Company Labor of management in 2009

Da Lat Map Factory

Surveying Map Services

Southern Branch

Total

Proportion (%)

512681024610418312443221027

242 100

54210000022324112

29 11.98

074792441291812209513

126 52.07

0100100223751283751

21.07

000000007435741536

14.88

Source: Report of labor, wages, income of Company (2009)

- Production workers have relatively high level of skills, mainly workers are grade IIIand grade IV and grade V, workers of grade VI and VII occupied 18.54% As a tradingcompany in the field of geodetic map so long the company has certain advantagescompared with other companies on the market Workers of grade I is 11.4% , if you look atthis figure, we see is not small, however the rate of labor grade I mainly general workersmake industry measurement, the key jobs of them are carrying machinery for

measuring Most of them are short-term labor contracts, casual workers.

Table 2.4: Levels of skilled production workers in 2009

879 100

6422353219

100 11.4

822173112424

118 13.4

2520253728526

166 21.4

2725284127323

174 20.5

2233272920126

158 17.9

717132517015

94 8.9

61272113010

69 6.5

Source: Report of labor, wages, income of Company (2009)

Company personnel can be divided into three groups: staffs at the company, staff atthe company units and employees in the unit members

Overall, the professional qualifications of the staff are relatively However thecomputer skills and foreign languages of them are very limited

With a large quantity labor force, but no equal in quality, management, training andhuman resources used in the Company is extremely complex The company also has issuedseveral documents aimed at decentralization of management personnel for the unitmembers For example, the "Regulations training of employees", issued together withDecision No 152/QD-CT on 27/10/2005 Under this regulation, the unit member canorganize training courses in unit including training of workers for improvement everyyear, new training, retraining, advanced training professional qualifications in short-termfor employees of their units or attend training to improve professional qualificationsclasses held by the Company For professional training required by the Company inarranging the employee but not sufficient conditions for self-organizing training(electricians, mechanics, drivers .), the Company will proceed with cooperation with

other units have legal status to organize classes and vocational certificate or special schoolssent for training the army and the state.

On the training process: Based on training needs of units, every year, membershipunits vote training requirements under the form issued by the Company and sent to laborand wage organization office Labor and wage organization office based on long-termplanning, direction for business development, the situation changes in equipmenttechnology, direct opinions of the Board of Directors and training needs of units proposedplan to conduct annual training program approved by the Board of Directors After thetraining plan has been approved by the Director, Labor and wage organization officeannounced plans for the approved training units related to the implementation units Theunits then prepare a list of participants in training courses on prevention and send to laborand wage organization office to track Based on the plan on the units to arrange time forattendances to participate fully programs as planned Upon completion of training theparticipants to report study results to the units and Labor and wage organization office toupdate the records, instrument tracking personal training managed by the Labor and wageorganization office The problem of labor recruitment was delivered to the member unitshave autonomy on the basis derived from the actual requirements of the unit The views ofthe Company consider the human element is the main motivation of the corporatedevelopment strategy So in the recruitment, qualifications of employees are a veryimportant criteria and the top priority Recruitment to the right person, right jobeffectively Besides taking the measure of capacity, the company also has priority of laborpolicy officials and employees in the industry This has resolved not only jobs for allchildren of the employees but also desire to build a team of workers who bring inheritance,develop good traditions of Hoa Hung trading and investment joint stock Company

In the training and retraining of personnel, in addition to the problem was assigned tothe member units, the company established by the council training director as Chairman,the members include Deputy Director responsible, a director of unit members havequalifications and competence Council Training Staff on duty to advise the Director ontraining and recruitment of the company

The current staff assignment still bring formality, especially in the member units, the