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Internal control systems

Classification of controls

5.1 Financial controls

 These controls express financial targets and spending limits.

 Examples include budgetary control and controls over sales, purchases, payroll
and inventory cycles.

5.2 Non-financial quantitative controls

 These controls focus on targets against which performance can be measured
and monitored.

 Examples include balanced scorecard targets and TQM quality measures

 It is important that a feedback loop exists:

– performance target (standard) set

– actual result recorded

– compared with target

– control action taken (if required).

5.3 Non-financial qualitative controls

 These form the day to day controls over most employees in organisations.

 Examples include employee training, management control methods (such as
organisation structure, contracts of employment), physical controls and project
management.

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