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1. MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY

VÕ THU PHỤNG
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THE IMPACT OF CONSTITUENT FACTORS OF THE
INTERNAL CONTROL SYSTEM ON THE BUSINESS
PERFORMANCE IN VIETNAM ELECTRICITY
SUMMARY OF ECONOMIC THESIS
Hồ Chí Minh City- 2022

2. LIST OF THE DISCLOSURE
1. Vo Phung Thu (2013), Interest groups and its negative effecting
on the economy and corrective solutions, Journal of Economics-
Technology, Binh Duong University, No. 04, pp 110-119,
December 2013.
2. Vo Phung Thu (2014), The impact of control environment on the
effectiveness and efficiency of the operations of Vietnam
Electricity, Journal of Economics- Technology, Binh Duong
University, No. 06, pp 77-95, June 2014.
3. Nguyen Dat Tien, Vo Phung Thu (2016), Factors of Internal
Control affecting performance by business group Vietnam
Electricity, Journal of Economics- Technology, Binh Duong
University;
4. Vo Nhi Van, Vo Phung Thu (2016), Internal Control System at
Southern Power Corporation_ current state and improving
solution, Proceedings of the International Conference on
Science and Technology of Electric Power University.

3. 1
PREFACE
1. Study’s reason
In recent years, many state-owned enterprises (SOEs) have not
fulfilled their most important political role, due to their inefficient
operation, as a tool supporting the government to regulate the
nation’s macro-economy.
Extant literature found that internal control affects operational
efficiency. However, in the context of Vietnam, there is lack of
evidence showing that operational inefficiency, specifically of SOEs,
is caused by weakness existed in internal control system. Therefore,
this study focuses on the impact of internal control on operational
efficiency, empirically at Vietnam Electricity Group (EVN).
2. Research aims
This research is aimed to explore elements of internal control system
and evaluate their impact on effectiveness and efficiency of EVN’s
operation, with the following goals:

Finding factors of Internal Control System which effect EVN’s
performance.



Evaluate those impact on EVN’s performance.


3. Research questions
Question 1: How is the current performance of EVN?
Question 2: Which factor of Internal Control System impacts on
EVN’s operation?
Question 3: What is the level of impact that each factor has on
EVN’s performance?

4. 2
4. Research Subjects and Research Scope
Research subjects: Factors of Internal Control System which impacts
on EVN’s performance.
Research scope: focus on the impact on EVN’s performance, but not
other goals such as: the truth and fair of financial reporting or
regulation compliance.
5. Research Method
This work employs mixed methodology, combining qualitative and
quantitative paradigm. All factors discovered in qualitative step by
using Exploratory Factor Analysis (EFA) model will be assessed in
quantitative step for hypothesis test.
Questionaire is filled via either face-to-face interviews or emails, by
non-probability sampling method. Survey process is conducted
through two stages:
Preliminary stage: is to evaluate the reliability of the scale (using
Cronbach's alpha) and discover factors (using EFA). Any flaw in
questionnaire found will be fixed before official questionnaire are
sent (in stage 2). This research optimally employs least-squares index
in STEPWISE model to define and evaluate the impact of internal
control factors on EVN’s performance. The suitability of the model is
tested by the R2
coefficient.
6. Dissertation
contributions In theory
Reviewing the theories of internal control and internal control
reports, both internationally and domestically.
Accomplishing the framework of the internal control consisting of 5
factors, 10 elements with 49 observed variables which affect SOEs’
performance, evidence from EVN.

5. 3
Building up a new measuring scales, which may be used by future
research in the field.
In practice
Discovering 20 new observed variables affecting the business
performance of EVN, this research mitigates weaknesses of internal
control at EVN which makes the entity’s operation inefficient. These
twenty variables together with the 29 variables identified in COSO
Report 2013 constitute measuring scales of factors in internal control
system which has an influence on the operational efficiency of EVN.
Via quantitative research this dissetation has discovered 49 measured
variables correlated with the 10 elements that affect the performance
of EVN. In this light, the work has developed a model comprising of
specific factors in the internal control system that affects efficiency
of EVN’s operation.
CHAPTER 1 OVERVIEW OF FORMER
RESEACHES ABOUT FACTORS OF
INTERNAL CONTROL SYSTEM AFFECTING
THE EFFECTIVENESS OF BUSINESS.
1.1 Studies on factors of Internal Control System affecting the
business performance of the enterprise.
1.1.1 International studies
Main streams include:

Impact of Internal Control on efficiency of business operations:
Reviewed studies have shown that there is close relationship between
Internal Control and efficient business operations of firms. And the
performance of the business to be considered by profits, revenues,
liquidity, ROI, ROA [Beeler and colleagues (1999), Jensen (2003),
Ittner (2003), Fadzil and colleagues. (2005), Kenyon and Tilton


6. 4
(2006), Brown and colleagues (2008), Mawanda (2008), Nyakundi
and colleagues (2014) Zipporah (2015)]. Weakness or shortcomings
of Internal Control systems are negatively affecting the performance
of the enterprises’ business. General weaknesses of Internal Control
such as: firms don’t build preventing risk system when operations;
lack of risk analysis; lack of appropriate information, and mandate
problems within the organization [Kakicha (2009), França same et al
(2010), Muraleetharan (2011), Dechow and colleagues (2011)].

Research about the impact of each factor on the effectiveness of
operations such as: Hooks (1994), Ezzamel (1997), Lannoye (1999),
Cohen (2002), Springer (2004), Rittenberg (2005), Hevesi (2005),
Steihoff (2001) and Hevesi (2005) demonstrated that control
environment is the most important component affecting the
effectiveness of Internal control, in which ethic factor and operating
style factor impacts staff’s motivation and behavior, and
organization's culture. Remaining components have complementary
relationship with each other closely, each department are essential for
achieving all three target groups: Operations, financial reporting and
corporate compliance.



Common features of enterprises which have weak Internal Control
System: Liu Xinmin (2005), Ge and McVay (2005), Ashbaugh-
Skaife (2006), Lin and Wu (2006), Shenkir and Walker (2006),
Doyle (2007b) showed that the general characteristics of weak
internal control, such as: often large scale enterprises but in the midst
of restructuring or just established, or with high level of ownership
concentration. These companies are lack of policies in revenue
recognition, clearly duty allocation, many changes in firms’s
structure, lack of investment in human resources for Internal Control.


7. 5

Impact of Internal Control to firms’ value: Ohlson (2001), Doyle


(2005), De Franco (2005), Beneish (2006), Cheh (2006), Doyle

(2007) Ogneva (2007), and Hammersley (2007) shows that
weaknessed in internal control negatively affect enterprises’ market
value, profitability, financial condition, quality of financial reporting,
revenue’s growth rate, and business investment..

How to evaluate Internal Control:

Emby (1994): audit approach is to rely on weaknesses of Internal
Control through specific processes, such as the inventory cycle, sales.
Louwers (2002): most appropriate assessment method based on the
five components of the COSO report. This view is included in
current auditing standards.
O'Leary, Conor (2004): built ICE model based on 7 factors of 3
components: control environment, information systems and control
procedures.
1.1.2 Studies in Vietnam related to Internal Control

Ngo Tri Tue et al (2004) with the nation-level thesis named
"Building Internal Control with the strengthening financial
management at the Vietnam Post and Telecommunication
Corporation ".



Pham Binh Ngo (2011), Ph.D. thesis titled "Organizing Internal
Control in accounting units of the Defense Ministry."



Nguyen Thu Hoai, Ph.D. thesis entitled "Improving the system of
internal control in the cement manufacturing factories of the Vietnam
Cement Industry Corporation ";



Bui Thi Minh Hai, Ph.D. with the theme "Improving the system
of internal control in garment enterprises in Vietnam."


8. 6
In addition, there are many Master theses with the theme of
improving the system of Internal Control in specific businesses.
Overall, dissertations and theses outlined above are based on the
elements of the COSO report, then conduct surveys seeking
recommendations for improvement Internal Control System.
Therefore, the research objectives of above work are not in the same
direction with the objective of this dissertation.
1.2 National Internal Control Reports
1.2.1 COSO Report and COSO Report in the public sector
COSO is a committee of the National Council of the United States
established to be against fraud in financial reporting. The COSO
Report issued in 1992 by COSO is the first document in the world
providing a definition and factors attributing to internal control
adequately and systematically. This report established a general
framework supporting entities improve effectiveness and efficiency
in their operations. Internal Control System consists of 5 integrated
parts, namely: Control environment; Risk assessment; Control
activities; Information and Communication; and Monitoring. The
Report is superseded by its new version in 2013.
COSO Report in the public sector
To maintain effective Internal Control System in Public Sector,
INTOSAI (International Organization of Supreme Audit Institutions)
issued a report of internal control in the public sector in 2001. This
document integrated COSO Report 1992 into INTOSAI standards
with some changes in which ethics is a part the Internal control and
Risk target. This is considered a prerequisite to strengthen public
confidence and to build effective governance.

9. 7
1.2.2 Turnbull Report 1999
The Turnbull Report was issued in 1999 in the UK by the Cadbury
Committee. As COSO's Internal Control Report, The Turnbull
Report included definitions, objectives and factors in an internal
control systems. An internal control system has operations in
controling, communicating and monitoring the effectiveness of the
Internal Control.
1.2.3 CoCo Report (Criteria of Control committee) of Canada
Issued in 1995, in Canada by the Institute of Certified Public
Accountant Canada (CICA - Canadian Institute of Chartered
Accountants). The report is based on CoCo criteria which was
similar COSO report, and combined with MBNQA standards.
1.2.4 MBNQA standards (The Malcoln Baldrige National
Quality Award)
MBNQA standards are issued in 1987 in the United States by the
Institute of Standards and Technology National NIST (The National
Institute of Standards and Technology).
MBNQA standards includes 7 criteria, which help enterprises reduce
management risk, measure the operational efficiency indicators.
These criteria are also the basis for building enterprise systems in the
Internal Control.
1.3 The achieved results and research issues
1.3.1 Results from reviewing extant literature
Research in the effectiveness of Internal Control by factors in
Internal Control.

Study only the impact of Internal Control toward three overall
goals of an organization: operational, compliance and financial
reporting


10. 8

Research about impact of Internal Control is only conducted in
some specified industry such as schools, hospitals and certain types
of businesses.


1.3.2 The continuing research

Previous studies only focused on constructing framework, then
conveyed weaknesses of internal control and their impact on
enterprise’ value and market value, the impact of internal control on
operational effectiveness of some limited industries.

No study is found, that is evaluate the impact of internal control on
operational effectiveness of large-scale entities, in term of their social
significant (Electricity, Water, Oil&gas, Aviation…). These entities
are often state-owned group, having huge financial resources,
therefore their risk management is complicated: their influence on
natural environment, industry risk, annual planning uncompleted.

Therefore, the identification and measurement of factors in Internal
Control which affects the performance of Vietnam state-owned
enterprises are significant and meaningful in both theory and practice
in Vietnam’s context.
CHAPTER 2 THEORY
2.1 Overview of Internal Control
2.1.1 History

Financial turmoils and political scandals in the United States in
the 70s (i.e. Watergate 1973) led to the introduction of Foreign
Corrupt Practices Act in 1977.



AICPA established a Special Committee on Internal Control
(1979). US Securities and Exchange Commission (SEC) launched


11. 9
regulations requiring firms report internal control system toward
financial reporting in the enterprise (1979).

These requirements were the main motivation to the
establishment of COSO, which was responsible for conveying
research about internal control. The COSO Report 1992 is the first
systematic and sufficient conceptual framework in internal control.


2.1.2 Terms

2.1.2.1 Internal Control

There are two main streams in Internal Control definition. One
considers Internal Control as a structure (Chaos Theory), while the
other consider Internal Control as a process (COSO Report).

According to Chaos Theory, internal control is a combination of
'control' and 'internal' which have closely relationship. Internal
controls can be viewed as either acts which are done, or the results
achieved by those acts.

COSO Report defines "Internal control is a process driven by the
manager, the board and the staff of the unit, it is set to provide a
reasonable assurance to achieve operational, financial reporting,
compliance objectives"

2.1.2.2 Performance


Prasser (1985); Yamamoto & Watanabe, (1989); Jones &
Pendlebury, (1992); Glynn (1985, 1997); O'Leary (1996); McCrae &
Vada, (1997); Grendon, Cooper & Townley (2001), Nath (2011, 67),
said that efficiency is measured via the comparison between the
inputs and outputs, the main purpose is to maximize the outputs with
available resources.


12. 10

Yamamoto & Watanabe (1989) suggest that the efficiency is
known as the responsibility of managers to use resources when they
are assigned to control them.



Whittington and Kurt (2001) said that the performance is often
determined by indices, such as profit growth rate, revenue growth,
return on equity.



Reviewed foreign studies have shown that there is close
relationship between Internal Control and efficient business
operations of firms. And the performance of the business to be
considered by profits, revenues, liquidity, ROI, ROA [Beeler and
colleagues (1999), Jensen (2003), Ittner (2003), Fadzil and
colleagues. (2005), Kenyon and Tilton (2006), Brown and colleagues
(2008), Mawanda (2008), Nyakundi and colleagues (2014) Zipporah


(2015)].


According to Decree 200/2015 / TT-BTC dated 12/15/2015 of
the Ministry of Finance on financial supervision for SOE (Article 5,
Section 1), efficiency of capital usage is measured by: margins after-
tax profit/Equity (ROE), or profit margin after tax/total assets (ROA)


...

2.2 Fundamental theory of Internal Control and Internal
Control system

2.2.1 Chaos Theory: factors in models are mutually interact, a
mistake in a unit or a division can cause serious consequences.

2.2.2 Agency theory applied in this thesis context explains
establishment of Internal Control System could minimize the self-
interested behavior of managers, monitor delegator’s behavior,
establish and maintain a mechanism to ensure that delegators act

13. 11
toward interest of the owners, particularly in the case of Vietnam
state-owned enterprises.
2.2.3 Contingency Theory: Internal Control System can not be the
same in all firms, and the control of each entity depends on factors
such as: technology, culture and external environment.
2.2.4 The Theory of the Firm: An operating company needs to meet
stakeholders’ requirements against inputs and outputs to maximize
profits (in current cash flow) with available resources. Therefore,
firms have to build Internal Control to meet these requirements.
2.2.5 Stakeholder theory: help enterprises identify rights and
obligation of each relating parties, limit and scope in control of the
business, in order to minimize risk, reduce negative impact on the
organization, ensure efficient Internal control.
2.3 Overview of state-owned enterprises (SOEs)
2.3.1 Characteristics Vietnam SOE

These are joint-stock or limited liability companies wholly or
major owned by the state.


2.3.2 Characteristics of business enterprises in public service
sector of the United States


The US business enterprises in public services are either state
owned or private ones.



Federal government of the United States controls these
enterprises through the provisions of the law (most important law is
anti-monopoly law) and the banking system through the Fed.



The group uses standard MBNQA to control the effectiveness of
their operations.


14. 12
2.3.3 Features of Chinese SOEs and efficiency of SOEs
operating in China

Similar to Vietnam counterpart, all public service businesses are
owned by the Central Government. SOE leaders are appointed by the
government.


2.3.4 The reality of the business performance of SOEs Vietnam


Most Vietnam SOE business operate inefficiently. Some even
went bankrupt.



Many SOEs have not completed their most important political
target: effective performance, the role as tool of Government to
moderate macro-economic.



Reason: weakness in corporate governance and internal control,
existence of group interests, ineffective audit activities, lack of
information transparency.



Vietnam Electricity Group is one of the ten SOE leading groups
of Vietnam. Similar to some SOE groups, in recent years, Vietnam
Electricity has many shortcomings in the management and unfinished
tasks: distribution electricity power, business performance is not
corresponding with available resources.

CHAPTER 3 METHODOLOGY AND RESEARCH MODEL
3.1 Research methodology and data collection
Dissertation used mixed methodology, including qualitative
paradigm to explore new factors which fit to characteristics in
Vietnam. Next, and quantitative paradigm to confirm qualitative’s
results.

15. 13
Data were collected from various sources related to the study:
(1) Secondary data including text, documents in the power sector (the
specified documents, newspapers and magazines, opinions stated by
the leaders of EVN, the documents from inspecting EVN which were
been published; EVN’s Annual Report
(2) Primary data from survey, combined with in depth interviews
from experts.
3.2 Data analysis
3.2.1 Qualitative data analysis
The process of analyzing qualitative data consists of 6 steps:
Step 1: Sort and prepare the data, take notes from EVN's
operation, and interview.
Step 2: Read the entire documents thoroughly to figure out
research issues appropriately and insightfully.
Step 3: Encode operation’s data and interview’s data separately.
Step 4: Use data to synthesize the factors which affect
performance of EVN and describe the relationship between the
factors in the model proposed.
Step 5: Interprete and present the meaning of the data based on
analytical models established.
Step 6: Verify the validity of the findings in the study.
3.2.2 Quantitative data analysis process
Subsequently, factors explored from interviews, combined with the
elements of the COSO Report 2013, formulate factor matrice
affecting EVN’s performance. The steps are as follows:
Step 1: Prepare questionaire from the elements discovered;
Step 2: Test the questionaire’s reliability and value of the scale;

16. 14
Step 3: Recommend the factors affecting performance of EVN
and use multivariate regression to identify suitable model:
Step 4: Measure the impact of the five factors of the internal
control system on the performance of the EVN.
Respondents are experts working at EVN. In order to estimate the
regression model, this study uses non probability sampling method
(convenience sample).
With mixed method: we determined factors affecting the operation of
the EVN, which measure the impact of factors on Internal Control
System and impact of each factor in the system effects the operating
performance of the EVN.
3.3 Theoretical research model

The dissertation uses five factors of Internal Control and


COSO’s assess tools as standard criteria to assess the impact of these
factors on firm’s performance.

The popularity of COSO’s Report makes this model valid. This


Report is now widely applied by almost all countries around the
world, by academics, and professional such as auditors.


COSO Report 2013 includes 17 rules. This is the framework of
the Internal Control System for not only managers but also other
parties outside the enterprise.



This model closely links Internal Control, enterprise risk
management (ERM) and corporate governance (Governance).



With the characteristics of SOEs in Vietnam, specifically EVN,
this work selects COSO Report 2013 as the principal framework for
researching with slight adjustments to fit Vietnam context.


17. 15
1. Control
Environment
2. Risk assessment
PER
FOR
MA
NCE
IN
3. Control Activities
EVN
4. Information &
Communication
5. Monitoring
Activities
Model 3.1: Theoretical research model
1. Demonstrates commitment
to integrity and ethical values
2.Exercises oversight
responsibility
3.Established structure,
authority and responsibility
4.Demonstrates commitment
to competence
5.Enforces accountability
6.Specifies suitable objectives
7.Identifies and analyzes risk
8.Assesses fraud risk
9.Identifies and analyzes
significant change
10.Selects and develops
control activities
11.Generral controls over
technology
12.Deploys policies and
procedure
13. Uses relevant information
14.Communicates internally
15. Communicates externally
16.Conducts ongoing and/or
separate evaluations
17. Evaluates and
communicates deficiencies

18. 16
CHAPTER 4 ANALYSIS AND DISCUSSION
4.1 Reality of operational perfomance and Internal Control in
EVN.
Analysis financial position of EVN:

In the last six years, EVN recognized loss in the first two years
(2010, 2011) while profited in the remaining four years.



Return on assets (ROA) is quite low (in 2014 was 0.0074).



Return on equity (ROE) is quite low (in 2014 just 0.0263).

The financial expense was 3 or 4 times than financial revenue.

Although in recent years EVN profited but didn’t commensurate
with the companies’ available resources.


Reviewed documents show a negative picture of internal control at
EVN, due to lack of some significant factors. Furthermore, the
existing factors were not ensuring that the system was in fully
effective because of in most cases these factors were designed in
system but not yet implemented.

Social effectives from EVN’s business


EVN is a state enterprise, besides doing business EVN also
executes government’s policies for social and economy goal such as:
stable electricity price for production needs of life, non-profit
business objectives nhuan_cac social welfare projects. This
effectiveness is considered through two tasks: rural electrification
and ensure nation’s security.


4.2 Discover factors of Internal Control affecting performance
Qualitative research showed that there were 15 elements in 49
obsevered variables affecting Internal Control. This research
discovers 20 new variables affecting the performance of the EVN.

19. 17
This is also the shortcomings of elements in Internal Control System
and makes operation of inefficiency in EVN. Twenty variables
associated with the 29 variables of COSO Report are identified that
affect the performance of the EVN, and formed the scale of factors in
Internal Controls affects the operational efficiency of Vietnam
Electricity.
To evaluate of the performance of EVN (dependent variables), This
research measured the degree effects through previous studies
(Grendon, Cooper & Townley (2001), Nath (2011, 67), John &
Morris (2011), COSO’s report, Decree 200/2015/BTC, and results of
in-depth interviews. The variables were:
1. EVN used assets in optimal way operating
2. EVN used their equity effectively;
3. EVN always improve profitability;
4. EVN has policies and optimize use of resources.
Quantitative research
+ Preliminary study:
Basing on results from a survey of 95 samples in EVN, this research
uses Cronbach's coefficient alpha to test the reliability of
questionaire. All scales are satisfied condition of Cronbach's alpha:
coefficient ranged from 0.700 to 0.932. Thus the scale for these
factors are satisfied.
Result from EFA test shows that only remaining 10 elements (from
beginning 15 elements) including 49 observed variables which were
regrouped. These findings were used to design the official
questionnaire used quantitative stage.

20. 18
+ Official Research:
256 questionnaires were sent to managers, professionals at EVN.
There were 256 filled questionnaire received.
Evaluate the fitness of the model
To test the compatibility of the overall regression model, we
hypothesize:
H0 : coefficient R2
population = 0;
H1 : coefficient R2
population ≠ 0.
With significance level α = 5%
From survey data, the following hypotheses are tested:
(1) Hypothesis H1: There is an positive correlating impact of the
control environment (MTKS) on EVN’s performance.
(2) Hypothesis H2: There is a positive impact of the risk
assessment (DGRR) to the performance of EVN.
(3) Hypothesis H3: There is the positive correlating impact of
control activities (HDKS) on EVN’s performance.
(4) Hypothesis H4: Information and Communications (MIC)
positively impact on EVN’s performance.
(5) Hypothesis H5: there is a positive correlation between
monitoring activities (GS) and EVN's performance.
(6) Hypothesis H6: The performance of EVN will increase when
the existence of the Internal Control System (AHKSNB).
Results from regression model showed that the proprosed model
explains 64.9% of the data collected.
Hypothesis Testing The fitness of the model.
When R2
≠ 0, only the relevance of the model to the data file is
tested. To test the compatibility of the overall regression model, we
supposed H0: coefficient R2
population = 0;

21. 19
H1:coefficient R2
population ≠ 0.
With significance level α = 5%
Results from ANOVA’s variance analysis table shows the F value
with sig = 0.00 <0.05. The null hypothesis H0 is rejected comfirming
that linear regression model is constructed overall (F = 96 542 with
Sig = 0).
1st
multivariate regression
The result orientates EVN's performance as follows: Regression
results with standardized coefficients (freedom Beta’s coefficient =
0)
Trends efficiency = 0.276HĐKS + 0.281ĐGRR + 0.27MTKS +
0.023TTTT + 0.029GS
The trend of operating performance significantly depends on HDKS,
DGRR and MTKS.
2nd
multivariate regression
To measure the influence’s degree of each factor on EVN’s
performance, a multi-variables linear regression is performed with
second hypothesis: Trend of effectiveness in EVN is a linear function
depends on 10 following elements:
(1) MTKS1: commitment to integrity and ethical values of
HDTV and managers at all levels
(2) MTKS2: The role and power of the board
(3) MTKS3: Building the composition of power and
responsibilities
(4) DGRR1: The manager’s responsible for assessment and risk
analysis
(5) DGRR2: Manager identifies and analyzes the significant
changes

22. 20
(6) HDKS1: Managers strictly comply with established policies
and procedures.
(7) HDKS2: EVN establishes general control approach with
application of information technology to control activities
(8) HDKS3: Control activities are established on the appropriate
selection basis.
(9) TTTT: Communication with outsider
(10) GS: Conduct regular continuous assessment, individual and
fix defects
ANOVA analysis’s table allows us to conclude the new model with
10 factors consistent with the overall (F = 58.725 with Sig = 0).
Normalized regression shows:
The trend level of the factors affecting the efficiency of business
operations of EVN = 0.111MTKS1 + 0.450MTKS2 - 0.160MTKS3 +
0.393DGRR1 – 0.056DGRR2 + 0.075HDKS1 – 0.071HDKS2 +
0.186HDKS3 + 0.185TTTT + 0.029GS
EVN’s performance significantly depends on MTKS2, DGRR1,
HDKS3 and TTTT. Specialy MTKS3, DGRR2 and HDKS2 tend to
reduce the magnitude of the dependent variables.

23. 21
CHAPTER 5 CONCLUSIONS
Extant literature related to internal control shows different view
about internal control, operational efficiency, as well as the national
reports in the world.
Extracted 5 components of Internal Control System with the 17
principles from COSO 2013 which impact on the performance of the
researched enterprises.
Through the research’s hypotheses, this research sets up a model with
five independent variables in Internal Control System. Results showed
that all five components: control environment, risk assessment, control
activities, information and communication and monitoring are affected
the same trend with the performance of EVN.
Results from 2nd regression testing showed that degree of influence
of each factor of Internal Control System on EVN’s performance:
Trend of EVN's business significantly depends the factors 'role and
authority of the Board of Members', 'the manager who responsible
for identification and risk analysis', and 'Media outside of EVN'.
To promote and improve the efficiency of the EVN’s performance,
we need to perform synchronous orientation completion of
environmental control (restructuring EVN by equitization, increasing
firm’s ability, improving both operate’s environment and
mechanism), risk assessment, the control activities, information
communication and strengthen supervision.
This research’s proposed model confirms 10 elements of 5 factors in
Internal Control with 49 observed variables affecting EVN’s

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performance and explains 64.9% collected data. So there should be
further studies to add variables, elements in monitoring factor and
risk assessment factor in Internal Control system so we can increase
the value of this research’s model.
Furthermore, this study only focused on the performance of EVN and
not focus on the other two goals mentioned in the COSO Report:
truth and fair financial reporting and compliance.