MANAGEMENT CONTROL SYSTEM AND ITS RELATIONSHIP WITH INTERNAL CONTROL

Management Control System and its Relationship with Internal ControlManagement Control System or MCS is a collection of tools used in organizations and implemented in a coordinated manner (Efferin and Soeherman, 2010). MCS itself consists of 3 important parts namely:

1. Management
2. Control
3. System 

1. Management

Management according to The Liang Gie is an element which is a series of acts of moving employees and directing all work facilities so that the objectives of the organization concerned are actually achieved, Management has 3 basic functions namely:

• Planning

At the planning stage, managers have the task to formulate plans for the company both financially and operationally planning.

• Actuating

Actuating is the stage where all resources (human) endeavor to realize the plan by carrying out the tasks that have been given previously.

• Controlling

Control is the process of ensuring that all activities carried out are in accordance with established plans and when deviations occur can be immediately addressed.

1. Control

Activity monitor to ensure an activity goes according to plan.

• System

System is a series of processes of elements that work together to achieve a goal.

The system can be divided into two namely: Artificial & Natural

Elements in MCS :

In its implementation, MCS is closely related to humans. Human performance is one of the determinants of MCS success in the structural world. As for some of the main problems that occur to humans in carrying out their duties, namely:

• Lack of Direction : Staff do not understand the direction / goals / goals of the company
• Lack of Motivation à Staff lack the incentive to do their jobs
• Personal Limitation à Limitations of expertise

Internal Control is a process designed to achieve internal goals

• Effectiveness and efficiency of operations
• Reliable financial reporting
• Compliance with laws and applicable regulations

Components in Internal Control:

• Control environment
• Risk control
• Control activities
• Information and communication

The relationship between internal control and MCS occurs when there is interaction between humans and the work given. This is very closely related to the Fraud triangle:

Fraud is a fraudulent act aimed at obtaining profits for the individual. To avoid any cheating that might occur, therefore an internal control is needed that can be manifested in the Management Control System.

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