THE ROLE OF THE INTERNAL CONTROL IN THE STUDY PROCESS
1
2
Gita Verdina , Nijol÷ Kaš÷tien÷
1
BA School of Business and Finance, Kr. Valdemara str. 161, LV-1013 Riga, Latvia
E-mail: [email protected]
2
VK EKF Naugarduko g. 5, LT-01141 Vilnius, Lithuania
E-mail: [email protected]
Abstract. This paper aims to explore and to assess the influence of the internal control system of a higher
educational institution on the study process and its main risks and problems. Methodology – Both
quantitative and qualitative methods have been used in the research. Based on the COSO model, original
survey forms were worked out and students’ surveys were carried out in 5 higher educational institutions.
Findings – The research shows relevant significance of the internal control in the study process. It allows
studying and analyzing problems and risks in the qualitative implementation of the study process.
Keywords: internal control, study process, feedback with students, higher educational institution.
1. Introduction
Rapid changes during the last years have activated issues related to management of the organization,
efficiency of the management process, as well as manager’s competence in higher educational
institutions. Higher educational institutions in their actions must affirm, “That they have serious attitude
towards their study program’s and to the quality of awarded degrees, as well they also must affirm that
they want to allocate resources for provision and verification of this quality. Initiatives and requirements,
that originate both in Europe and outside of Europe in the process of higher education
internationalization, requires corresponding reaction” (Henri 2006). Europe standards and guidelines for
the provision of internal quality in higher educational institutions define guiding principles regarding
quality provision. Guiding principles define that: administration of the higher educational institution must
admit liability regarding its offered quality and its provision, the quality of academic program has to be
developed and improved in the interests of students and other receivers of higher education, higher
educational institutions must facilitate the culture of quality, organizational structures must be efficacious
that allow realizing and supporting study program and quality provision for the purpose of reporting and
control is fully in compliance with the improvement needs of quality provision, etc. (Standards and
guidlines for quality assurance in the higher education area in Europe 2005).
Quality provision processes are directly connected with internal control and risk management that not
always have been realized effectively and according to the requirements of higher educational institutions
and during the process of study program implementation.
Both practitioners and theoreticians consider that management process in the education is very
important (Hoyle 1982). Higher educational institutions should be able to make changes up to all the
changes in the society: in technologies, politics, culture, etc. Higher educational institutions have to attain
conformity with the interests of students and society. The greater focus must be on professional study
program (Hoyle 1982).
L. Morriey considers that the student is a customer in the higher education and that his opinion is
very significant while carrying out quality assessment. Hearing of students’ opinion is the sign of
democracy in the higher educational institution (Morriey 2003). Researching and analyzing management
processes and basic principles in the higher educational institution, L. Morriey concludes that they have
been adopted from the management practice of private companies (Morriey 2003).
While exploring content and impact of the internal control and the risk management implemented in
higher educational institutions during the process of study program implementation (Verdina 2009), one
of the conclusions was that in order to provide qualitative higher education, it is important for both higher
educational institutions overall and while implementing study program’s to ensure development,
maintenance and consistent evaluation and improvement of the efficacious system of the internal control,
because it has a direct impact on the process, on the study program implementation quality and
diminishes the level of the risks.
2. Literature review
Today concept ‘control’ has been explained in various ways like any activity made by organization that
focuses on increasing probability that targets of the organization will be reached (Gleim 2004). He notes
that the essence of the quality is receiving the feedback or information for the aims of management There
is the following definition in the professional practice standards of internal audit: ‘Control is an action of
management or other parties, in order to manage risks and increase probability that defined aims and tasks
will be reached. Management is planning, organizing and guiding the accomplishment of the activities, in
order to provide reasonable assurance that tasks and aims of the organization will be accomplished
(2000). In order to make control more effective, there are the following principles (Ukolovs et al. 2006).
Evaluation system contains basic indicators:
Objectivity,
Continuity,
Influence,
Worldliness,
Economy,
Mutual connection of principles,
Feedback between control subject and object.
One more term has been used in the theory – internal control. V. Praude and J. Belcikovs (Praude,
Belcikovs, 1996) writes that internal control is a process initiated by all level governance of the
organization. The internal control has been carried out in order to provide sufficient assurance for
accomplishment of organization aims, assessing: operational procedure, efficacy of conditions etc.,
relevance to binding laws and other normative acts and regulations Control is the supervision over
execution of plans and necessary amendments to them, in order fit for changes of internal and external
environment and to achieve organization aims.
Personnel have to carry out the internal control in every level of organization, though responsible for
it is the higher management. Studying the requirements that are necessary for the implementation of
internal control in the organization, K. H. Spencer Pickett (Pickett 2005) has mentioned that it’s required:
1. To define the necessity of the control, id est., manager has to know situations that require
separate internal control measures applied and consequently responds upon it.
2. To plan appropriate control measures. In case the necessity for the internal control has been
stated, management has to plan and organize implementation of respective control measures.
3. To implement appropriate control measures. To check that the implementation process of
internal control measures would be most effective.
4. To maintain and to update the control system. This is continuous process and management
has to pay great attention to it.
I. Berzkalns, I. Boulton (Berzkalns, Boulton, 2000) draw attention that the effective structure of the
internal control is a balance between the expenses of control procedures and risks involved. Unreasonable
activities of the internal control are costly; they may diminish the efficiency of organization and
negatively influence personnel’s state of mood. The other extremity is the lack of internal control that
subordinates the organization to the unnecessary risk.
J.F. Henri (Henri 2006), assessing the role of the internal control in the organization points out that
its main task is to ensure organization with the information as a basic for the assessment of the internal
control efficiency.
The internal control of educational institutions includes such control activities:
Elaboration of internal standards, criteria, norms, and usage in the assessment of different
systems,
Determination of the activity scope of defined standards and norms,
Analysis and ranking of information that allows determine conformity level to the set
norms,
Cause analysis of founded irregularities,
Identification of alternative version of deflection assessment,
Decision making,
Decision implementation and inspection (Воробьева 2008).
Author claims that during the management process the system must ensure the feedback or reception
of valid and objective information about the ongoing processes, results, implementation of aims in the
organization. The analysis of gained data allows to ascertain the nature and tendency of organization
spirit and development, as well as to adapt the changes of internal and external environment. The results
of analysis may be used both in the decision making and planning.
The author in her study about the role of internal control system during the study process of higher
educational institutions relies on the COSO model developed by „The Committee of Sponsoring
Organizations of the Treadway Commission” (COSO 2005). This model has been widely used in practice.
The internal control system has been developed by the correlative elements: control environment, control
procedure or activities, risk assessment, information and communication, monitoring and improvement
((COSO 2005). J.F. Henri (Henri 2006) evaluating this model notes that the COSO model gives possibility
to identify and evaluate acquirements from the control activities. Exploring the elements of the COSO
model, it is simple fact that environment particularity of control determines ongoing processes in
particular organization. It has been modeled by the mission, strategic aims, plans, structure of
organization, politics, systems, procedures and instructions, standards, and evaluation criteria etc. It has
been influenced by factors that either facilitate or retard performance of the control procedures. I.
Berzkalns and I. Boulton (Berzkalns, Boulton 2000) write: “Environment of the control is made by the
senior management of the organization, and this environment determines the way how all personnel
recognize control. The following factors are included in the environment of control:
• The management obviously has expounded attitude of honesty and ethical values and they
have been used in practice;
• Determination to employ people that are honest and to implement such practice of human
research management which is in conformity with desirable level of honesty, ethic and competence;
• Clear philosophy and style of the action of the management regarding such factors as risking,
attitude towards financial reports, activity conformity to the organization policy and procedures, as
well as delegacy of liability;
• Development of reasonable organization structure, reposing on quantity and way of activity.”
The element of internal control – risk management, within the framework of the COSO model. It
includes identification of risks, assessment and prevention. Today the issues about the management of the
risks caused by the external environment are very actual. It is important to carry out risk management not
only in the organization overall but also in the rendered service, int. al. in the scope of offered study
programs. Exploring different risk qualifications and internal control affecting factors, as one of the
essential risk groups in higher educational institution is the risks of process provision, but one of the
directly affective factors in the process of study program implementation – existing and potential students
(Verdina 2009).
3. Research method
Researching the impact of internal control system on study process, qualitative and quantitative research
methods have been used. Building upon COSO model, original questionnaire has been worked out. In the
questionnaire forms, as the featured documents of the internal control 12 internal normative documents
were mentioned, for example, the aims of the higher educational institution, the acquired study program,
the implementation schedule of the acquired study program, the methodological instructions of study
course acquisition, the study fee and its settlements, the regulations for students, the methodological
instructions for the elaboration and presentation of practical works, etc.
During the research students’ survey was carried out in five higher educational institutions, for example,
in four Latvian higher educational institutions (The BA School of Business and Finance, The Latvian
University of Agriculture, The Ventspils University College, The School of Business Administration
“Turiba” (Cesis branch) – further in the text respectively as BA, LLU, VA, BAT) and in one Lithuanian
higher educational institution (The Vilnius council – further in the text as the VK). Students from
different level study programs of business administration finance and economics were chosen as a target
group. In total 1224 students took part in the survey, 41 questionnaire forms were acknowledged as
invalid. Students expressed 321 commentaries about the role and importance of the internal control
system during the acquisition process of the study program.
Sociological research data processing program SPSS was used for data analysis, by using both the
descriptive and the analytical data processing methods.
4. Results
Summarized results of the study show that students from all higher educational institutions claimed that
the mentioned elements of the internal control system are very important. Some commentaries are shown
in Table 1.
Table 1. Students commentaries on necessity of normative documents (scale: elaborated by the author)
Higher education
institution
BA
Commentaries
All above mentioned is necessary in order to acquire chosen study program and adapt it to
own wishes and needs.
It is very necessary to know the aims of BA, because they motivate students. The other
documents are also important to know, because students have to know what to take into
consideration. BA is not hiding these things, BA provides information about it and that
delights us.
All these provisions and documents are vitally important for every student.
It is important for the students to know everything, because students duly have to think out
what they want from the study program, every definite signature has great meaning.
VA
In order to successfully implement studies, it is important that every student knows what to
take into consideration – what others expect from the student and what students want to get
from appropriate higher educational institution and study program.
The way how the aims and requirements are elaborated is the indicative of the level of
higher educational institution. In case there are no aims and requirements, students don't
know what to do and they are loosing trustiness to higher educational institution.
LLU
It is very important in the inception of the study process. Students must know what they will
have to do and what they are able to do, and also if they will be able to arrange financial
commitments.
Everything is directly connected with the provision of study process.
Because, I as a part time student must receive all necessary information about higher
educational institution which I have chosen.
BAT
The mentioned documents help to avoid problems and help to do everything timely and
accurately.
VK
It is important for my future life, because my life depends on studies.
During the survey students gave their opinion about the internal regulatory documents that are most
essential during the acquisition process of study program and if they have seen those documents. Students
also gave their opinion about the question to what degree mentioned above internal regulatory documents
have helped them to acquire study program. Further study was done on how ICS functions during the
study process. During the survey students evaluated the following issues:
What is the attitude of the administration to the internal control in the higher educational
institution – whether the administration of the higher educational institution expects from students
total observance of internal and external laws and regulations;
Whether information exchange system in the higher educational institution is able to
ensure the possibility to receive all the necessary information fast enough;
Whether administration of the higher educational institution ensures students with
information about the changes in the study process timely;
Whether students are informed about changes in the timetable;
Whether the higher educational institution ensures solving conflict situations and
consideration of students’ complaints;
- Whether administration of the higher educational institution finds out students’ opinion
about presentation methods of lecturers and how they promote necessary knowledge and skills to
students during the study course;
- Whether there is a possibility for students to express their opinion
(satisfaction/dissatisfaction) about organization of study process;
- Whether administration of the higher educational institution finds out students’ satisfaction
regarding collaboration and receptiveness of structural units, etc.
Due to the outcomes of study the following conclusion has been done – as five most important internal
regulatory documents that students should be introduced to in all higher educational institutions were
mentioned – the acquired study program and the methodological instruction for the elaboration and
presentation of practical works, then the implementation schedule of the acquired program and the
guidelines of practice procedure, as well as information about the study fee and its settlements.
Unlike Latvian students, for the students of VK information about the study fee and its settlement is not
so actual, because the higher educational institution receives funding from the state budget.
The conclusion is that the vast majority of the students are introduced to the above mentioned important
documents (Fig1).
100
90
80
70
VK
60
BA
50
VA
LLU
40
BAT
30
20
10
0
1
2
3
4
5
6
7
8
9
10
11
12
Fig. 1. Students introduction with the internal regulatory documents of the higher educational
institution ( %) (scale: elaborated by the author)
Students of BA School of Business and Finance and BAT most of all are informed about the study fee and
its settlements. This is due to the fact that the above mentioned higher educational institutions do not
receive funding from the state budget and existing internal control system provides effective debtor policy
in the higher educational institutions and great attention has been paid to financial risk management.
Students express their comments about this issue (Table 2). Analyzing to what degree gained information
has helped students during the study process, we can conclude that in answers appear above mentioned
normative documents (Fig 1), though there are differences in the different higher educational institutions
in this issue. For example, BAT and VA – in the question 9. This indicates that either large part of
students hasn’t seen internal normative documents in the appropriate field, or such regulatory documents
don’t exist in the higher educational institution.
Table 2. Students commentaries about studies abroad (scale: elaborated by the author)
Nr.
1.
2.
3.
4.
Commentaries
I would like to know more information about studies abroad
It is advisable to give more information about studies abroad, about the level of education abroad, about
requirements for the studies abroad, as well as about the practice places
The requirements about studies abroad wasn’t explained, accordingly there were some misunderstandings
with the credit transfer after returning back from ERASMUS studies
As a matter of fact information about practice and studies abroad was very good motivation tool for the
better school results, because without good school results I wouldn’t be able to participate in the exchange
studies
This is evident also by the commentaries made by the students, for example, „I haven't seen some of
the documents because I didn't have interest or I didn't have necessity to do that".
As it was previously mentioned, effectiveness of the ICS activity has been affected by the attitude
and understanding of implementation of the internal control of executive and the rest of administration in
particular the higher educational institution. The study showed that in four out of five higher educational
institutions more than 60 % students think that they have to take into account full requirements of internal
and external normative documents (Fig 2).
29
3
VA
68
29
3
LLU
68
31
7
BAT
Partly
62
No
Yes
36
18
VK
46
27
5
BA
68
0
10
20
30
40
50
60
70
Fig. 2. Attitude of administration of the higher educational institutions towards observance of internal and external
laws and regulations (%)(scale: elaborated by the author)
Additional research is advisable about this issue, in order to find out the reason why students consider,
that they may partly or fully ignore requirements of normative documents.
100
90
80
70
60
50
40
30
20
10
0
76
65
56
VK
47
BA
VA
LLU
52
BAT
Fig. 3. The ability of information exchange system of the higher educational institutions to gain
necessary evaluation of information (%)(scale: elaborated by the author)
Very important question is whether existing information exchange system in the higher educational
institution ensures the possibility to quickly gain necessary information during the study process. The
research results show that students’ satisfaction level with the existing information exchange systems in
various higher educational institutions are very different (Fig 3). Students from different higher
educational institutions have offered opinion on this issue (Table 3).
Table 3. Students commentaries about studies abroad (scale: elaborated by the author)
Nr.
1.
Commentaries
I would like to know more information about studies abroad
2.
It is advisable to give more information about studies abroad, about the level of education abroad, about
requirements for the studies abroad, as well as about the practice places
3.
The requirements about studies abroad wasn’t explained, accordingly there were some misunderstandings
with the credit transfer after returning back from ERASMUS studies
4.
As a matter of fact information about practice and studies abroad was very good motivation tool for the better
school results, because without good school results I wouldn’t be able to participate in the exchange studies
The essential question on the study process ensuring is whether existing information exchange system in
the higher educational institution provides students with information about the changes in the study
process (Fig 4) and in the timetable (Fig 5) timely.
100
80
70
69
66
60
52
40
21
9
20
10
33
29
21
57
22
21
15
5
Partly
No
Yes
0
VK
BA
VA
LLU
BAT
Fig. 4. Evaluation of students’ provision with the information about the changes in the study process (%) (scale:
elaborated by the author)
The study shows that these issues are the most problematic in BAT. It is advisable to explore whether this
indicator is affected by the fact that all interviewed persons are part time students. It is interesting to
estimate and compare students’ opinions about the existing information system and the possibilities to
gain necessary information fast enough and effectively, for example about changes in the study process
and in the timetable.
100
80
82
72
76
76
68
60
40
20
20
8
3
25
19
15
5
7
10
14
0
VK
BA
VA
LLU
Partly
No
Yes
BAT
Fig. 5. Evaluation of students’ provision with the information about the changes in timetable ( %) (scale: elaborated
by the author)
Analyzing the gained data with the tables by SPPS programs, it is obvious that most of the BA
students (58 %) confirm, that information system in BA ensures acquirement of the necessary information,
as well gives the possibility to acquire information about the changes in study process. However in the
other higher educational institutions the positive answers were less– BAT – 48 %, VA – 47 %, VK – 41 %
and LLU – 32 %. The gained data affirms that existing information systems in the higher educational
institutions ensure information about the changes in the timetable.
Students’ participation in the development of study process organization is very important. Large part of
the interviewed students claim (VK -35 %, VA- 30 %, LLU- 28 %) that they don’t have possibility to
express their opinion about the organization of study process (Fig. 6.).
100
90
80
70
43
60
50
46
52
50
40
62
34
40
36
37
28
30
20
18
14
7
23
10
10
Partly
No
0
VK
BA
Yes
VA
LLU
BAT
Fig. 6. Students’ possibility to express their opinion about the organization of study process ( %) (scale: elaborated
by the author)
In order to ensure qualitative lecture presentation process, it is useful for the administration to explore, if
presentation methods chosen by lecturers support students receiving necessary knowledge and skills in the
study course (Fig. 7.) Unfortunately the analysis of received data shows that this issue is not sufficiently
noticed. LLU – 45%, VA – 17%, VK – 11 % students think that their opinion is not enquired, VK- 41%,
VA – 33 %, LLU – 23%, students think that their opinion is enquired partly. More positive results are in
those higher educational institutions which are not funded by the state budget (BAT, BA). In the same
way it is regarding the question whether administration enquires students' satisfaction with the
collaboration of structural units and receptiveness with the students (Fig. 8).
100
90
80
72
76
70
60
41
48
50
50
45
33
40
19
30
32
11
20
23
14
17
9
10
10
0
VK
BA
VA
LLU
Partly
No
Yes
BAT
Fig. 7. Students’ possibility to express their opinion about presentation methods chosen by lecturers ( %) (scale:
elaborated by the author)
100
90
80
70
60
43
50
46
52
50
40
62
34
40
36
37
28
30
20
18
14
7
23
10
10
0
VK
BA
VA
Partly
No
Yes
LLU
BAT
Fig. 8. Information for the administration of higher educational institutions about students’ satisfaction with the
collaboration of structural units ( %) (scale: elaborated by the author)
5. Conclusions
The carried out research shows that:
- Internal control systems directly influence organization of study process. Arranged and
efficacious internal control system supports qualitative implementation of the study process and study
program, as well systematic development.
- The element of the internal control system – information exchange process and the lack of
feedback cause risks for ensuring qualitative study process.
The administration of higher educational institutions should:
- Improve and ensure qualitative work of the information exchange system, thereby supporting
effective two-way communication or feedback also with students about ongoing processes in the
higher educational institution.
- Evaluate the ICS, for example, whether developed internal control system is adequate,
effective and efficient during the process of study program implementation.
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