Internal Control Systems: Example Problem
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The FCPA, COSO, and SOX, (just to name a few), covered corporate internal controls addressing different aspects. In addition IT has established their own internal controls that address the IT specifics and called 'COBIT'.
Is it possible to have one internal control system that applies to all companies under the same industry? Discuss the reasons for, and the reasons against having one unique internal control system for every company. Do you think that adequate company internal control could/should prevent irregularities, and how?
A scholar claims that some American corporations do not have adequate controls, others over control their business. A number of government officials stated that corporate America needs to establish more controls? Discuss the pros and cons of adding more controls over corporate activities.
Please provide full detail explanation of each of the five listed questions. With in depth Analysis to certain degree. Also include your source of information and cite them as per each discussion question. It must be not less then 1000 words total. Also I ask that you search for the most appropriate/correct answers addressing each point and express a sound opinion. There must be an adequate support to the research!).
Also Citing Textbooks and Adequate websites are very much needed. As I expect information to come from textbooks as well and not only web pages.
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This solution discusses internal control systems.
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➢ Is it possible to have one internal control system that applies to all companies under the same industry?
Expectations from internal control vary in two ways. First, expectations differ on the basis of what internal controls can achieve. Some observers believe that internal control should prevent economic loss and prevent companies from going out of business. Second, even when there is an argument about what internal control can or cannot do, there can be differences over what that concept means and how it would be applied. Corporate executives often express their dissatisfaction about failure of controls and since internal control serves so many important functions, there is an increasing need for better control systems. Hence, if a common internal control system is adopted, all parties involved with these controls would be able to speak in a common language and communicate effectively. Business executives will be positioned to assess control systems against a standard, and strengthen the systems and move their enterprises toward established goals. From the established base in the form of a common control framework, further research can be conducted for improvements. Legislators and regulators would also be in a better position to understand internal controls, how they apply to the industry, and its benefits and limitations.
References:
Internal Control — Integrated Framework Executive Summary. (n.d). COSO. Retrieved from http://www.amlcft.com/COSO%20Internal%20Control%20-%20Integrated%20Framework%20Executive%20Summary.pdf
➢ Discuss the reasons for, and the reasons against having one unique internal control system for every company.
A company's internal control system would reflect its control environment which encompasses its organizational structure. This system includes control activities, information and communication processes, and processes for monitoring the effectiveness of internal control system.
Advantages of unique internal control system:
• Company would be able to apply its internal control in a manner which takes account of its particular ...
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