Analysis and Review Method in Internal Control
Internal control is an important element of organizational operations and management. To ensure that business operations become more efficient, effective, and secure, organizations must have an effective system for managing and controlling their activities. The analysis and review method (ARM) is one method that organizations use to shore up their internal control processes.
The analysis and review method is a comprehensive approach to internal control that includes steps such as review, analysis, and evaluation. This involves looking at the entire internal control system from a variety of angles. This includes assessing the effectiveness of the current system, analyzing the organization’s objectives, identifying and addressing weaknesses, conducting ongoing monitoring and testing, and providing feedback for improvement.
The review component of the analysis and review method requires management to evaluate the process used to design and implement control activities. This means examining the internal control system to determine if it is functioning as it should and if it is meeting the organization’s objectives. To do this, management needs to assess the design of each control activity, evaluate the level of risk associated with each activity, and identify potential weaknesses.
The analysis step involves management evaluating the methods and tools used to implement the internal control system. This is done to check that the system is operating in a consistent and efficient manner, and that the activities implemented are effective. This also involves examining the quality of the data used to assess the system’s performance, implementation, and results.
The last step of the analysis and review method is the evaluation phase. In this phase, management evaluates the effectiveness of the internal control system by measuring and analyzing its impact on the organization’s overall performance. This involves benchmarking performance against prescribed standards and determining the system’s overall effectiveness.
The analysis and review method is an essential component of any internal control system. It is a comprehensive approach that helps organizations evaluate the effectiveness of their control activities, identify weaknesses, and make necessary improvements. By taking this method seriously, organizations can increase their confidence in the safety, security, and efficiency of their operations.
