Internal control and corporate governance

Internal Controls

My application for admission to your prestigious institution is based on a number of different factors, some that are internal, and some that are external. The internal factors confront such questions as; 1) What do I look to gain from my education? 2) Does this particular educational environment enhance my attempts to acquire further knowledge that will assist me in my chosen profession? And finally, 3) Will my experience(s) at this institution result in achieving my goals and objectives?

The external factors affecting my decision to apply are 1) the courses that are offered at your institution, 2) the cost of continuing my education at your facility, and 3) the professors, staff and instructors who will be conducting the classes and courses that I will be attending.

After much due consideration I have decided that the educational environment displayed and adhered to by your institution is one that I would dearly enjoy being a part of. Not only does it answer my external and internal questions, it also has an outstanding reputation for the proffered courses and the staff that teaches those courses.

In order to gain the knowledge and skill I will need to excel in my chosen field, I will need to be very selective in how I approach the learning process. I have experienced a number of years in learning the ins and outs of the internal control process that many international banking firms have implemented. My seven years of learning will pale in comparison of the education that I hope to obtain at your university.

Part of that learning, I believe will include information on reports such as the one on the internal control process for financial institutions produced by the Basle Committee. The report states, "A system of effective internal controls, is a critical component of bank management and a foundation for the safe and sound operation of banking organizations" (Basle, 1998, p. 4).

The Basle Committee has its permanent home in Basle and is comprised of banking industry representatives and authorities from the United States, Great Britain, Germany, France, Belgium, Canada, Japan, Netherlands, Sweden, Switzerland and Luxembourg. The reason for compiling an important report such as the Basle Report is because a number of banks had suffered significant losses due to lack of internal auditing and protective measures. The Committee decided that establishing a framework for the banking industry to adhere to in regards to internal control systems would be beneficial for the financial industry.

The Committee also found that "an analysis of the problems related to these losses indicates that they probably could have been avoided had the banks maintained effective internal control systems" (Basle, 1998, p. 4).

A primary focus of mine while I am attending your university is to study not only the words of the Basle Report and similar works, but to study the results of implementing the recommended procedures from those reports as well. An additional resource that I hope to peruse more often is the Internal Control Comptroller's Handbook.

This book states that, "A properly designed and consistently enforced system of operational and financial internal control helps a bank's board of directors and management safeguard the bank's resources, produce reliable financial reports, and comply with laws and regulations" (Comptroller, 2001, p. 1).

That statement is one of the primary reasons behind my desire to gain admittance to your educational institution. Being able to study and comprehend methods that will assist in my efforts to 'safeguard bank resources' will allow me to become much more proficient in my chosen field, further propelling me to the upper echelon of bank management. The handbook also states that effective internal control will reduce the possibility of significant errors and irregularities while assisting in their detection when and if they do occur. Learning such detection methods will assist me in protecting not only the assets of the bank, but also the assets of those individuals who have placed their trust in the financial institution that employs me.

However, internal controls are more than just discovering errors and irregularities, controls go hand in hand with internal audits. Audits differ from controls in that an audit will provide "an objective, independent review of bank activities, internal controls and management information systems to help the board and management monitor and evaluate internal control adequacy and effectiveness" (Comptroller p. 2).

Using audits and internal controls to provide information for the smoother and more seamless operation of a bank or financial firm can be composed into a governance system. The system would spell out the controls, standards, methods and designs for the entire operations. The Banking Regulation and Supervision Board recently published a statement that defined internal control systems. It stated that the internal control system would include "all of the financial, operational and other control systems which are carried out by internal controllers and which involve monitoring, independent evaluation and timely reporting to management levels systematically in order to ensure that all the bank activities are performed by management levels in accordance with current policies, methods, instructions and limits" (Banking, 2001, p. 1). To have knowledge in all those areas and more would be an achievement that I could be proud of, and to know that I was able to garner such data from your institution would lead me to a future of attainment, achievement and a level of excellence unsurpassed by any other institution. Achieving a degree from your university would one allow me, in future years, to brag to my children and grandchildren of leaving a legacy that one could always be proud of.

Over the past several years I have diligently observed how an internal control system can be beneficial to a financial banking firm. I have watched as individuals with as much or less experience than I, have been able to immediately discern details of certain events that I had difficulty in understanding. I studied their actions and discovered that the only difference between myself and these individuals is the level of education that they had achieved.