The System of Internal Control as a Factor in the Integration of the Strategic and Innovation Dimensions of a Company’s Development
Abstract
This research study owes its relevance to the increasing practical significance of control amid intensifying recessional trends in the economy. Putting together an efficient system of internal control is becoming one of the crucial factors for the successful development of companies and boosts in their competitiveness. The system of internal control ought to be aimed at fulfilling both the company’s current and strategic objectives for its business activity.
This paper employs a set of general scholarly methods of research, like analysis and synthesis, search for cause-and-effect relationships, linking logical and historical processes, and the laws of dialectics. The author also draws upon the theory of innovative development, the theory of scientific management, and an institutional approach.
Control is viewed as one of the most significant functions of management. It is both subordinate and dominant in relation to management’s other functions. The paper provides an insight into the fundamental principles underlying the process of putting together the company’s system of internal control. Control is seen as a condition for being able to fulfill the company’s strategy and as a factor for its innovative development. The author suggests that, to boost the efficiency of control, it helps to employ a matrix organizational-management structure based on frame-based (event) data processing.
To ensure the integration of strategic and innovation objectives for development, it helps to employ the COSO ICIF and ISO 9001:2015 international management standards. Putting in place control activities based on the BSC and KPI systems will help meet the requirements of international standards and ensure the flexible (adaptive) work of the system of internal control.
The author identifies some of the key characteristics of companies’ system of internal control crucial to resolving their strategic and innovation objectives for development. The paper also puts forward a set of recommendations for enhancing companies’ system of internal control under today’s conditions.
References
[2] COSO (Committee of Sponsoring Organizations of the Treadway Commission). 2013. Internal control – Integrated framework. New York, NY: American Institute of Certified Public Accountants.
[3] COSO (Committee of Sponsoring Organizations of the Treadway Commission). 1992. Internal control – Integrated framework. New York, NY: American Institute of Certified Public Accountants.
[4] Deming, W.E. 1986. Out of the crisis. Cambridge, MA: MIT-CAES.
[5] Drucker, P.F. 2002. The discipline of innovation. Harvard Business Review, 80(8), 95.
[6] Fayol, H. 1949. General and industrial management. London, UK: Pitman.
[7] FERMA/ECIIA (Federation of European Risk Management Associations & European Confederation of Institutes of Internal Auditing). 2010. Guidance on the 8th EU Company Law Directive. Article 41. Brussels, Belgium.
[8] ISO. 2015. ISO 9001:2015 Quality Management Systems – Requirements. Geneva, Switzerland.
[9] Janvrin, D.J., Payne, E.A., Byrnes, P., Schneider, G.P., and Curtis, M.B. 2012. The updated COSO internal control-integrated framework: Recommendations and opportunities for future research. Journal of Information Systems, 26(2), 189–213.
[10] Kaplan, R.S. 1991. New systems for measurement and control. Engineering Economist, 36(3), 201–218.
[11] Kaplan, R.S., and Norton, D.P. 1992. The balanced scorecard: Measures that drive performance. Harvard Business Review, 70(1), 71–79.
[12] Krotkova, E.V., Mullakhmetov, K.S., and Akhmetshin, E.M. 2016. State control over small business development: approaches to the organization and problems (experience of the Republic of Tatarstan, the Russian Federation). Academy of Strategic Management Journal, 15(SpecialIssue1), 8–14.
[13] Lapteva, E.N. 2012. Razrabotka kontseptsii avtomatizirovannoi sistemy upravleniya predpriyatiem na osnove freimovoi modeli predstavleniya dannykh [Developing the concept of the automated enterprise management system based on a frame-based model for representing data]. Sovremennaya Тekhnika i Тekhnologii, 12. (in Russian). http://technology.snauka.ru/2012/12/1400 (accessed June 1, 2017).
[14] Latyshev, I.O., and Akhmetshin, E.M. 2015. Methodological approaches to analyzing the indicators of human capital management in the interests of innovation development of enterprise. International Business Management, 9(6), 1565-1570.
[15] Lebedeva, T.E., Akhmetshin, E.M., Dzagoyeva, M.R., Kobersy, I.S., and Ikoev, S.K. 2016. Corporate governance issues and control in conditions of unstable capital risk. International Journal of Economics and Financial Issues, 6(1S), 25-32.
[16] Martin, K., Sanders, E., and Scalan, G. 2014. The potential impact of COSO internal control integrated framework revision on internal audit structured SOX work programs. Research in Accounting Regulation, 26(1), 110–117.
[17] Mayo, G.E. 1933. The human problems of an industrial civilization. New York, NY: Macmillan.
[18] Mayo, G.E. 1975. The social problems of an industrial civilization: With an appendix on the political problem. London, UK: Routledge & Kegan Paul.
[19] Mescon, M.H., Albert, M., and Khedouri, F. 1988. Management. New York, NY: Harper & Row.
[20] Mullakhmetov, Kh.Sh. 2008. Korporativnyi kontrol' [Corporate control]. Kazan, Russia: Izdatel'stvo Kazanskogo Gosudarstvennogo Universiteta. (in Russian).
[21] Mullakhmetov, Kh.Sh. 2011. Sovremennye podkhody i kontseptsii v praktike upravleniya predpriyatiem [The latest techniques and concepts in the practice of business management]. Menedzhment v Rossii i za Rubezhom, 6, 76–82. (in Russian).
[22] Mullakhmetov, Kh.Sh. 2012. Nauchnye shkoly upravleniya i ikh vliyanie na evolyutsiyu funktsii kontrolya [Scientific schools of management and their influence on the evolution of the control function]. Menedzhment v Rossii i za Rubezhom, 6, 129–133. (in Russian).
[23] Mullakhmetov, Kh.Sh. 2013. Kontrol'-menedzhment [Control management]. Moscow, Russia: Ekonomika. (in Russian).
[24] Mullakhmetov, K.S., Aminova, R.M., and Akhmetshin, E.M. 2014. Control in a management system in modern conditions. Asian Social Science, 10(24), 237-247.
[25] Mullakhmetov, K.S. 2015. Some approaches to the development of the management control concept. Journal of Advanced Research in Law and Economics, 6(1), 128-137.
[26] Mullakhmetov, K. 2016. Control in the system of managerial decisions procedures: A conceptual view. Problems and Perspectives in Management, 14(3), 64-76.
[27] Mullakhmetov, K.S., Sadriev, R.D., Gabidinova, G.S., and Akhmetshin, E.M. 2016. Control in marketing-based management. Academy of Marketing Studies Journal, 20(Specialissue2), 13–19.
[28] Neave, H.R. 1990. The Deming dimension. Knoxville, TN: SPC Press.
[29] North, D.C. 1989. Institutions and economic growth: An historical introduction. World Development, 17(9), 1319–1332.
[30] Roethlisberger, F.J. 1977. The elusive phenomena: An autobiographical account of my work in the field of organizational behavior at the Harvard Business School. Cambridge, MA: Harvard University Press.
[31] Roethlisberger, F.J., and Dickson, W.J. 1939. Management and the worker: An account of a research program conducted by the Western Electric Company, Hawthorne Works, Chicago. Cambridge, MA: Harvard University Press.
[32] Sharafutdinov, R.I., Gerasimov, V.O., Yagudina, O.V., Dmitrieva, I.S., Pavlov, S.V., and Akhmetshin, E.M. 2017. Research of Human Capital in View of Labor Potential of Staff: National Companies Case Study. Paper presented at the Proceedings of the 29th International Business Information Management Association Conference - Education Excellence and Innovation Management through Vision 2020: From Regional Development Sustainability to Global Economic Growth, 839-852.
[33] Sheremet, A.D. 2000. Upravlencheskii uchet [Management accounting]. Moscow, Russia: ID FBK-PRESS. (in Russian).
[34] Shewhart, W.A. 1930. Economic quality control of manufactured product. Bell System Technical Journal, 9(2), 364–389.
[35] Simon, H.A. 1965. The logic of rational decision. British Journal for the Philosophy of Science, 16(63), 169–186.
[36] Stiglitz, J.E. 2002. Employment, social justice and societal well-being. International Labor Review, 141(1–2), 9–30.
[37] Taylor, F.W. 2003. Scientific management. Abingdon, UK: Routledge.
[38] Podvoiskii, G.L. (Ed.). 1992. Upravlenie - eto nauka i iskusstvo: H. Fayol, H. Emerson, F. Taylor, H. Ford [Management as a science and an art: H. Fayol, H. Emerson, F. Taylor, H. Ford]. Moscow, Russia: Respublika.
[39] Urwick, L. 1933. Management of tomorrow. London, UK: James Nisbet & Co.
[40] Vasilev, V.L., and Akhmetshin, E.M. 2014. The role of information and information technology in the management control function. Biosciences Biotechnology Research Asia, 11(3), 1469-1474.
[41] Vasilev, V.L., Tuktarova, E.M., and Akhmetshin, E.M. 2013. A balanced scorecard and economic security of companies. World Applied Sciences Journal, 27(13 A), 424–427.
[42] Vyruchaeva, A.E. 2014. Postanovka vnutrennego kontrolya operatsii po MSFO [Setting up the system of internal control based on the IFRS]. Aktual'naya Bukhgalteriya, 9. (in Russian). http://aktbuh.ru/msfo/uchet-i-otchetnost/postanovka-vnutrennego-kontrolya-operatsiy-po-msfo (accessed June 1, 2017).
[43] Wei, Y., and Yan, Z. 2010. Research on the key factors of high-tech enterprises' innovation management control. Proceedings of the International Conference on Networking and Digital Society, China, 1, 399–402.
[44] Wilberg, J., Preißner, S., Dengler, C., Füller, K., Gammel, J., Kernschmidt, K., Vogel-Heuser, B. 2016. Performance measurement in interdisciplinary innovation processes – Transparency through structural complexity management. In M. Monteiro de Carvalho, S. D. Eppinger, M. Maurer, & L. Becerril (Eds.), Sustainability in Modern Project Management (pp. 11–22). Paper presented at the Proceedings of the 18th International DSM Conference, São Paulo, Brazil.
[45] Zizlavsky, O. 2016. The use of financial and nonfinancial measures within innovation management control: Experience and research. Economics and Sociology, 9(4), 41–65.
The Copyright Transfer Form to ASERS Publishing (The Publisher)
This form refers to the manuscript, which an author(s) was accepted for publication and was signed by all the authors.
The undersigned Author(s) of the above-mentioned Paper here transfer any and all copyright-rights in and to The Paper to The Publisher. The Author(s) warrants that The Paper is based on their original work and that the undersigned has the power and authority to make and execute this assignment. It is the author's responsibility to obtain written permission to quote material that has been previously published in any form. The Publisher recognizes the retained rights noted below and grants to the above authors and employers for whom the work performed royalty-free permission to reuse their materials below. Authors may reuse all or portions of the above Paper in other works, excepting the publication of the paper in the same form. Authors may reproduce or authorize others to reproduce the above Paper for the Author's personal use or for internal company use, provided that the source and The Publisher copyright notice are mentioned, that the copies are not used in any way that implies The Publisher endorsement of a product or service of an employer, and that the copies are not offered for sale as such. Authors are permitted to grant third party requests for reprinting, republishing or other types of reuse. The Authors may make limited distribution of all or portions of the above Paper prior to publication if they inform The Publisher of the nature and extent of such limited distribution prior there to. Authors retain all proprietary rights in any process, procedure, or article of manufacture described in The Paper. This agreement becomes null and void if and only if the above paper is not accepted and published by The Publisher, or is with drawn by the author(s) before acceptance by the Publisher.