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Evaluation of internal control system on revenue and expenditure activities at Agribank Vietnam - Aluoi District Branch - 1

Phan Hanh Nguyen


INDEX

PART I: PROBLEM STATEMENT 1

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I.1. Reasons for choosing the topic. 2

I.2. Research objectives. 3

Evaluation of internal control system on revenue and expenditure activities at Agribank Vietnam - Aluoi District Branch - 1

I.3. Research subjects. 3

I.4. Scope of research. 3

I.5. Research methods. 4

I.6. Structure of research topic. 4

PART II: RESEARCH CONTENT AND RESULTS

CHAPTER 1: THEORETICAL BASIS OF BANKING 7

AND THE INTERNAL SYSTEM OF COMMERCIAL BANKS 7

1.1. Theoretical basis of Commercial Banking 7

1.1.1.Concept of commercial banks 7

1.1.2. Characteristics of commercial banks 7

1.1.3.Functions of commercial banks 7

1.1.4. The role of commercial banks 9

1.1.5.Business operations of commercial banks 9

1.2. Theoretical basis of Internal control system 10

1.2.1. Concept, objectives, functions and roles of internal control 10

1.2.1.1. Concept of internal control 10

1.2.1.2. Objectives of KSNB 10

1.2.1.3. Functions of KSNB 10

1.2.1.4. The role of KSNB 11

1.2.2. Components of the internal control system 11

1.2.2.1. Control environment. 11

1.2.2.2. Risk assessment 13

1.2.2.3. Control activities. 14

1.2.2.4. Information and communication 16

1.2.2.5. Monitoring 16

1.2.3. Potential limitations of the internal control system 17

1.3. Internal control system at commercial banks 17

1.3.1. Concept of internal control in commercial banks 17

1.3.2. Risks in the operations of commercial banks 18

1.3.3. Objectives of internal control at commercial banks 18

1.3.4. Control activities at commercial banks 18

CHAPTER 2: CURRENT STATE OF INTERNAL CONTROL OF ACTIVITIES 20

CASH RECEIPT AND PAYMENT AT AGRIBANK A LUOI DISTRICT BRANCH 20

2.1. Overview of AGRIBANK A Luoi district 20

2.1.1. History of formation and development 20

2.1.2. Functions and tasks 20

2.1.3. Management structure 21

2.1.4. Analysis of operating results in 3 years 2010 - 2012. 22

2.1.4.1. Analysis of human resource situation of AGRIBANK - A Luoi district branch

2010-2012 period 22

2.1.4.2. Analysis of the capital assets situation of Agribank - A Luoi District Branch in the period 2010-2012 24

2.1.4.3. Business performance results of Agribank - A Luoi District Branch in the period

2010-2012 period 27

2.2. Processes in trade management activities at AGRIBANK A Luoi district 31

2.2.1. Process of preserving and protecting TM 32

2.2.1.1. Regulations on packaging and sealing 32

2.2.1.2. Regulations on vault safety 32

2.2.2. TM 33 revenue and expenditure procedures

2.2.2.1. Process of collecting and paying TM for customers. 33

2.2.2.1.1. Principles of collection, expenditure and counting TM 33

2.2.2.1.2. Collection process when customer comes to pay: 34

2.2.2.1.3. TM payment process. 35

2.2.2.2. Internal transaction delivery process of AGRIBANK ALuoi 36

2.2.2.3. ATM Fund Process 37

2.2.3. Other processes 39

2.2.3.1. Regulations on money transportation 39

2.2.3.2.Periodic fund inspection and inventory process 40

2.2.4. Handling excess and shortage of TM. 41

2.2.4.1. Handling excess or shortage of assets in delivery and packaging: 41

2.2.4.2. Handling excess or shortage of assets in the vault, transaction counter, and in transit 41

2.2.4.3. Handling of shortages and losses due to negligence in business 42

2.2.4.4. Handling shortages and losses due to subjective reasons. 42

2.3. Risks in commercial revenue and expenditure activities. 42

2.4. Current status of internal control activities at Agribank A Luoi district. 43

2.4.1. Contents to be considered and internal control procedures to be implemented 43

2.4.1.1 Assignment and division of tasks 43

2.4.1.2. Authorization 44

2.4.1.3. Use of assets 45

2.4.1.4. Asset reconciliation 47

2.4.1.5. Accounting 48

2.4.1.6. Consider additional computerized controls 49

2.4.2 Document control process in TM management activities 49

2.4.2.1. Purpose of document control 49

2.4.2.2. Document control process in TM 50 management activities

2.4.2.2.1. Circulation of commercial collection documents. 50

2.4.2.2.2. Circulation of payment vouchers. 50

CHAPTER 3: EVALUATION OF THE INTERNAL CONTROL SYSTEM FOR ACTIVITIES 52

CASH RECEIPT AND PAYMENT AT AGRIBANK A LUOI DISTRICT BRANCH. 52

3.1. Advantages and disadvantages of the internal control system. 52

3.1.1. About the internal control system at Agribank in general 52

3.1.2. Regarding the internal control system for revenue and expenditure activities of TM 53

3.1.2.1. Advantages 54

3.1.2.2. Disadvantages 55

3.2. Some recommendations for Agribank A Luoi district. 55

3.2.1. In general operations. 55

3.2.2. In internal control activities for revenue and expenditure activities of TM 56

PART III: CONCLUSIONS AND RECOMMENDATIONS 57

III.1. Conclusion 58

III.2. Recommendation 58

III.2.1. For the State 58

III.2.2. For Bank 59


LIST OF ABBREVIATIONS


Board of Directors: Board of Directors

DN : Enterprise

Board of Directors: Board of Directors

HSC: Head office

KH: Customer

KSNB: Internal control

KSV: Controller

KTT: Chief Accountant

KTV: Accountant

NH: Bank

SBV: State Bank

Commercial Bank: Commercial Bank

Central Bank: Central Bank

TM : TM

TQ: Treasurer

TS: Assets


LIST OF DIAGRAM

Diagram 2.1: Management organization of AGRIBANK A Luoi district. 21

Diagram 2.2: Processes in trade management activities at AGRIBANK, A Luoi District branch 31

Diagram 2.3: Collection process at Agribank, A Luoi district 34


LIST OF TABLES

Table 2.1: Labor usage situation at Agribank - A Luoi district branch 22

period 2010-2012 22

Table 2.2: Asset and capital situation of Agribank - A Luoi district branch

2010-2012 period 24

Table 2.3: Business performance results of Agribank - A Luoi district branch in the period

2010-2012 period 27

Table 2.4: Procedures for controlling the assignment and division of tasks 44

Table 2.5: Procedures for controlling authorization 45

Table 2.6: Procedures for controlling the use of assets 46

Table 2.7: Procedures for controlling asset reconciliation. 47

Table 2.8: Accounting control procedures 48

Table 2.9: Control procedures on computer system 49


PART I PROBLEM STATEMENT


I.1. Reasons for choosing the topic.


In a market economy, the Bank (NH) is one of the most important organizations of the economy. It plays a very important role in stabilizing and developing the economy of a country. A country's economy can only develop at a fast and stable pace when there is a correct monetary and financial policy. At the same time, the banking system must operate strongly and effectively, be able to attract and concentrate capital sources and allocate those capital sources effectively.

In the current conditions of Vietnam, the commercial banking system plays the most important role in intermediating between savings and investment, between agents with excess capital and agents lacking capital. Through its activities, banks can mobilize a lot of capital domestically and internationally to increase capital sources for economic development. Commercial banks always hold more assets than any other financial institution and represent an essential link to transfer the government's economic policies - especially monetary policy - to the remaining components of the economy. In addition to the role of concentrating capital and providing for the economy, commercial banks also create money, act as payment intermediaries and effectively manage means of payment. In all items, activities related to money are almost all throughout the activities of a commercial bank. Moreover, the money item is where risks and fraud are likely to occur, and if there are no timely control measures, it will cause great losses. To help commercial banks minimize the risks that may occur during their operations, it is necessary to build a competent and effective internal control system (ICS). An effective ICS will ensure that the assets of commercial banks are used appropriately, ensure and maintain the reliability of financial information and compliance with laws and regulations, thereby creating trust for customers, shareholders and partners.

Vietnam Bank for Agriculture and Rural Development (Agribank) is one of the leading banks in Vietnam that has a significant impact on the economy when fluctuations occur. Therefore, risks in Agribank's operations not only affect the Bank itself but also spread to other entities in the economy. Realizing the importance of building an internal control system for

With regard to commercial banks, especially control measures for cash items, I decided to choose the topic: "Evaluation of the Internal Control System on Commercial Revenue and Expenditure Activities at Agribank Vietnam - Aluoi District Branch" for research.

I.2. Research objectives.


- General objectives:

Analysis and evaluation of Internal Control activities on revenue and expenditure activities at Agribank Vietnam - Aluoi District Branch

- Specific objectives:


+ Learn about the processes in trade management and risks in revenue and expenditure activities


+ Research on internal control activities on revenue and expenditure procedures at Agribank branch in A Luoi district.

+ Evaluate and propose some measures to further improve the effectiveness of activities.

KSNB activities for TM management.


I.3. Research subjects.


- Commercial revenue and expenditure activities of Agribank, A Luoi district branch


- Internal control process for revenue and expenditure activities at Agribank branch in A Luoi district.

- Control methods to be implemented to prevent TM risks in operations

Activities of Agribank branch in Aluoi district


I.4. Scope of research.


- Content: The topic only focuses on researching and understanding the process of trade management and internal control for trade revenue and expenditure activities: process of preserving and protecting trade; process of collecting and spending money; risks in revenue and expenditure activities; control procedures that need to be implemented.

- Time: The research topic started from February 2013 to May 2013. The data collected in the topic mainly reflects the operating situation in the 3 years 2010-2012.

- Space: The topic was carried out at Agribank Branch, Aluoi District

I.5. Research methods.


- Document research method: This method is used to study and systematize theories about commercial banks, evaluate the current status of internal control of commercial revenue and expenditure activities at Agribank, A Luoi district branch.

- Method of data collection and synthesis: research of actual data at the bank combined with learned theory, information collected through the internet, newspapers, books to supplement knowledge for completing the topic, bank reports and through actual contact there.

- Comparison method: this method aims to process collected data used to compare data between years, the increase and decrease of indicators through analysis periods.

- Direct interview method: Ask directly the person providing information and data necessary for the research topic. This method is used in the stage of collecting necessary information and raw data related to the topic.

- Observation method: observe actual revenue and expenditure activities at the branch through participating in the transaction process and commercial management of the bank to grasp basic related knowledge.

I.6. Structure of research topic.


The topic consists of 3 parts:


Part I: Problem Statement


This section presents general information related to the research problem, the implementation of the topic, the reasons for conducting this research, the reasons for choosing the topic, the necessity and significance of the topic.

Part II: Research content and results. This part includes 3 chapters: Chapter 1: Theoretical basis of Banking and the Internal Control System of Commercial Banks.

General theoretical basis to clarify related basic concepts and contents

to commercial banks, characteristics and risks of the internal control system.

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