Expenditure Control – Appraisal of Techniques for Expenditure Control

Expenditure Control – Appraisal of Techniques for Expenditure Control

How an organization uses resources especially money makes it, saves it, and spends it. Is perhaps one of the best test of effective management. Although money ought by no means to be regarded as the chief end of an organization’s objectives, neither is it a trifling matter to be held in philosophic contempt, representing as it does to so large and extent the means of continuity. In a bid to finding the most prudent resource of money management, researcher have developed different techniques Viz: inventory management, working capital management, cash management etc. all these techniques are encompassed in one way or the other in cost or expenditure control.

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Expenditure control involves the regulation, limitation or confinement of expenses to minimize over runs and ensure compliance with target plans. For any expenditure control technique to be effective, it must have a dual purpose Viz:

  1. It must attempt to keep waste, misappropriation, piltering, inefficiency and other expenses leaks under check.
  2. It must allow for the creation of system of records which will establish accountability for expenses; the employment of current, pertinent and concise accounting and statistical reports to reveal how the people responsible for the expenses are charging their responsibilities.


Most employees probably would not think of entering into dishonest arrangements. But as John T. (1975) writes, “Even a basically honest employee may be tempted occasionally to steal assets or otherwise to take advantage of his or her position of authority and trust in the company. If the opportunity is there and if there is little chance of ever being found out, the temptation may be two much to resist. Thus, a procedure should be put into effect to deter and detect dishonesty in respect of any asset vulnerable to theft or misuse.

Guarding against dishonest and honest mistakes are the prime concern in the control expenditure which can be implemented through its accounting procedures. Astor S.D (1978) opines in loss prevention control and concepts that keeping in mind the fact that a company depends on its accounting system for the information needed to prepare its financial statement and internal management report, the accounts and all their supporting accounting records need to be complete, up to date and accurate” an institution cannot simply assume that its accounting system is gild. It must institute positive or affirmative procedures and steps to make sure that these high standards are in fact achieved.

In summary, an organization whether profit or non-profit oriented need to design and enforce positive procedures and methods to deter and detect dishonest mistakes in order that its accounting system will be highly reliable. Thus the need for internal control.


Will More A.W. (1971) attest the “the responsibility for establishing and maintaining adequate internal controls rests with management.” This attestation is supported by the CICA in its Audit Technique study. Internal control and procedure Audit test (1968) where it states that it is management which is responsible for safe guarding the asset, ensuring that accounting data is accurate and reliable and promoting operational efficiency and adherence to prescribed policies” it however point out that the system of internal control should not be regarded as something installed purely to meet the whims of a fussy auditor, but should  include the controls which management considers necessary to discharge its responsibilities. The CIFPA however believes that internal audit exists within a public authority to carry out an independent and continuous appraisal of accounting, financial and other processes including to secure the installation of soundly based system of control in each area of departmental responsibility. Wills more however notes that, an auditor in making an audit is to review the system of internal control and check that is in existence. As a result he notes the auditor may recommend modifications and improvements for the system but the entire responsibility for safeguarding the assets in its custody. Still rests on the shoulder of management”

There are two approaches to the classification of internal control Viz:

  1. That given by the Auditing statements and Guidelines 3204. the guideline classified internal control by organization, segregation of duties physical, authorization and approval, arithmetic and accounting, personnel, supervision and management
  2. The AICPA classified it by objectives, jurisdiction, method and general nature.


Unnecessary losses through employees misuse of resource embezzlement and fund are abhorred by all employers. The government is inclined to minimize he exposure to losses of these nature by the enactment of different edicts, introduction of different financial procedures and the institution of different committees boards and panels. It is however a know fact that many thousands of persons in position of trust and responsibility do “go wrong” every year, often with disastrous results on their employers.

Statistic as to be the total annual unnecessary or wasteful expenditures in government non-profit organizations in this country is necessarily incomplete because of the rapidity of its accourance and political considerations. However, careful review of all available information on the employees has now reveals that misuse of resource by employees has now become a major avenue for unidentified public expenditure. There is thus a need to control this pilferage of allocated resources.

Internal control from the above discussion can be said to be a good means of expenditure control. Nevertheless, no frame of internal control is perfect in the sense that it can prevent some shrewd individuals from beating either by outright embezzlement or by producing in accurate records. The task of internal control is not prevention of illegal expenditure avenue nor is it implementation of operating perfections, rather the task is the designing of a cost – effective tool that will help achieve efficient operation and reduce embezzlement, fraud, misuse and wasteful expenditure of resources. Also the possibility of errors arising from misunderstanding of instructions, a mistake of judgment, distraction, fatigue and carelessness hinders the absolute effectiveness of internal control


          The growing recognition by management of the benefits of good internal control and the complexities of inadequate system of internal control in government hospitals and allied organizations has led to control over all other internal controls. Gilles N.C (1976) notes “That the emergence of the internal auditor as a specialist in internal control is the result of an evolutionary process that is similar in some way to the evolution of independent auditing.” This evolution becomes eminent after the World war I when the responsibilities of internal auditors began to broaden. Cahartey J.B opines that “early audits were primarily designed to test proper administration of responsibility and to accomplish this purpose the facts of the case were usually laid before the person who would recognize errors and omission when present” in early days he continues, this usually involves hearing the accounts for few called read or write. This practice could be traced from the 14th to 16th century.

Internal auditing is an element of the internal control system set up by the management of an organization to examine evaluate and re-portion accounting and other controls on operations, Howard L.R. (1978) in his book, Taylor and Perry Principles of auditing, Described internal auditing as “ a review of operations and records, sometimes continuous undertaken within an organization by specially assigned staff” it may form an important part of the internal control system, but it is not an indispensable part thereof. Schiott R.R (1971) is of the view that , purpose of internal audit is gain for management skilled eyes and ears to observe employees on the job, under normal working conditions, without stringing up employees suspicion or resentment”  a good internal auditor can detect many irregularities which affect theft of drugs, inventory and cash, kick backs, padded expenditures, misuse of company and practically every thing else of concern to management.


The internal auditor controls the expenditure of organization by reviewing charges to the accounts to determine that the expenditures are properly authorizes and that the they represent justifiable expenditures of the organization funds, and that the charges have been properly accounted for.

Usually the internal auditors principal concern in the examination of cost and expenses should be the minimization and control of unnecessary expenditure. Since management controls costs and expenditure largely through internal report, the internal auditor should often pay close attention to the reliability and usefulness of those reports. An organization Natale J. (1968) points out in management’s role in Employee theft “Is as effective or as weak as its management” thus, procedures and policies can only be as strong as those regularity and enforcing them. Without full support of top management, the audit department cannot function as a useful working part of any organization.

Furthermore, Astor S.D (1978) asserts, :controls will never fail if they are not audited” Thus the need for internal audit to appraise and review the internal expenditure control system and yo be effective in addition to the continuous audits, in-depth audits should be made at least annually. This should include an examination of inventory schedules and such further test as the situation may require. The audit program should cover a comprehensive examination and verification of all assets, liabilities, income and expense accounts.

Internal auditing as a technique for expenditure control extends further to the budgets. The preparation of the budget figures are usually reviewed by the internal auditor. Variance as submitted by the management accountant are further analyzed.


Traditional audits are concerned with financial rectors unlike this traditional audits which also referred to as “regularity auditing” efficiency, performance or management audits. Copeland et al opine “go beyond the question of checking regularity (reflecting respect for existing regularity and the purposes established by the executive and the legislature to include concern with efficiency and effectiveness of financial management. That is effectiveness and efficiency with which resources have been used in arcing out an organization’s activities, functions and programs. The provide mother type of control in non-profit organizations. Such management or performance, audits are intended to help management to do a better job by identifying waste and inefficiency and recommending corrective action.

Expenditure Control – Appraisal of Techniques for Expenditure Control

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