Internal controls within selected Maltese shipping companies and agents : an evaluation

Abstract

Undoubtedly, a sound internal control system is vital for the organizations' day to day operations and in ensuring that the companies' objectives are achieved in the most effective and efficient way possible. Purpose: The purpose of this dissertation is to evaluate the internal controls implemented by local shipping companies and agents and assess their importance in this respect. The controls in place for the sales process, the purchasing process, the cash cycle and the demurrage system were examined in detail. The dissertation seeks to identify any weaknesses within the implemented systems and suggest recommendations for improvements. Design: The objectives of the study were achieved by collecting data from a series of semi-structured interviews with the financial controllers of selected local shipping companies and agents. Furthermore, semi-structured interviews with auditors were conducted in order to tackle this aspect from the auditors' perspective. Findings: Local shipping companies and agents perceive internal controls as an important prerequisite. Robust systems of internal controls are being implemented throughout the selected processes, which provides the financial controllers with peace of mind that the financial statements presented are correct. Conclusions: Despite the various internal control processes in place, several loopholes remain unaddressed. The size of the local shipping companies tends to restrain them from applying the principles of segregation of duties within their processes. Value: Several recommendations were suggested in order to mitigate the weaknesses identified. These include the introduction of a formal set of guidelines made available to employees, periodic meetings dedicated to the analytical review of current prices, random checks performed by the financial controller with respect to internet banking systems and increase in training for the documentation office clerks. Adopting such measures should result in a more robust system of internal controls, thereby ensuring objective achievement in a more effective and efficient manner.