THE ROLE OF THE INTERNAL CONTROL IN THE STUDY PROCESS Gita Verdina 1, Nijol Kaš tien 2 1 School of Business and Finance, Kr. Valdemara str. 161, LV-13 Riga, Latvia E-mail: gita.verdina@ba.lv 2 EKF Naugarduko g. 5, LT-1141 Vilnius, Lithuania E-mail: prodekane@ekf.viko.lt 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 6). 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 5). 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 3). 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 3). 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 9), 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 4). 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 (). In order to make control more effective, there are the following principles (Ukolovs et al. 6). 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 5) 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, ) 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 6), 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 8). 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 5). 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 5). J.F. Henri (Henri 6) 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 ) 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 9). 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 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,,, T) and in one Lithuanian higher educational institution (The Vilnius council further in the text as the ). 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 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, because they motivate students. The other documents are also important to know, because students have to know what to take into consideration. is not hiding these things, 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. 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. T 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. 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. The mentioned documents help to avoid problems and help to do everything timely and accurately. 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 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). 9 8 7 5 3 T 1 2 3 4 5 6 7 8 9 11 12 Fig. 1. Students introduction with the internal regulatory documents of the higher educational institution ( %) (scale: elaborated by the author) Students of School of Business and Finance and T 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, T and 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. Commentaries 1. I would like to know more information about studies abroad 2. 3. 4. 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 % students think that they have to take into account full requirements of internal and external normative documents (Fig 2). 3 29 68 3 29 68 T 7 31 62 18 36 46 5 27 68 3 5 7 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. 9 8 7 5 3 76 65 56 47 52 T 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. Commentaries 1. I would like to know more information about studies abroad 2. 3. 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 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. 8 7 69 66 52 57 21 21 9 29 33 22 5 15 21 T 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 T. 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. 8 72 82 76 68 76 8 15 19 25 3 5 7 14 T 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 students (58 %) confirm, that information system in 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 T 48 %, 47 %, 41 % and 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 ( -35 %, - 3 %, - 28 %) that they don t have possibility to express their opinion about the organization of study process (Fig. 6.). 9 8 7 5 3 43 5 52 34 36 7 14 18 46 62 37 28 23 T 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. 45%, 17%, 11 % students think that their opinion is not enquired, - 41%, 33 %, 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 (T, ). 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). 9 8 7 5 3 72 48 41 11 9 5 45 33 19 32 23 17 T 76 14 Fig. 7. Students possibility to express their opinion about presentation methods chosen by lecturers ( %) (scale: elaborated by the author) 9 8 7 5 3 43 5 52 34 36 7 14 18 46 62 37 28 23 T 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. References Gleim, I. N. 4. CIA Review. Part I. Internal Audit s Role in Governance, Risk, And Control. Eleventh Edition. Florida: Gleim Publications, Inc. pp. 9 94. Henri, J-F. 6. Management control systems and strategy: a resource-based perspective, Accounting, Organizations, and Society 31(6): 529 558. Hoyle, E. 1982. Micropolitics of Educational organizations. Edited by Harry Tomlinson, Educational Management I: 5 4. Morriey, L. 3. Quality and Power in Higher Education. Open University Press. Philadelphia, pp. 138 1. Spencer, K. H. 5. The Essential Handbook of Internal Auditing. Wiley: 87 Standards and guidelines for quality assurance in the higher education area in Europe. Report of ENQA about standards and guidelines for quality assurance in the higer education area, 5. [online] [accessed 19 December 8]. Available from Internet: http://www.enqa.net/bologna.lasso. Verdina, G. 9. Risk Management as a Tool for Securing Internal Control in the Process of Study Programme Implementation in Higher Education Institutions, Scientific Papers University of Latvija 749: 13 136. Воробьева С. 8. Основы управления оброзовательными системами. ИЦ Академия, pp. 69 7. Berzkalns, I.; Boulton, I.. Iekšējās kontroles sistēmas rokasgrāmata, Rīga: Īpašu uzdevumu ministra valsts reformu lietās sekretariāts, Rīga 2 8. COSO raksturojums. COSO 5. [online] [accessed 19 vember 6]. Available from Internet: http://www.coso.org/ Praude, V.; BeĜčikovs, J. 1996. Menedžments. Vaidelote, pp. 313 314. Ukolovs. V.; Mass, A.; Bistrjakovs, I. 6. Vadības teorija. Jumava. 224 p.