Internal Control Structure


Often when I am working on a consulting assignment, I become aware that a number of the non-financial managers that I am talking to are unclear about their organisation's internal control structure. Sometimes, even financial managers seem to have the wrong perspective on internal controls. This can create problems especially if it is indicative of a low control-consciousness throughout the organisation. If this is indeed the case then many risks will increase as a result, including fraud risks.

There are two important messages that I like to convey both to the directors and managers that I work with on consulting assignments and also to my course delegates regarding the internal control structure, as follows.

Broad Perspective

The first message is to stress the importance of taking a broad perspective of the internal control structure. The control concept is not something that is confined to the organisation's controls manual, or to the documented sets of systems notes and controls or to the written down policies and procedures. Internal control has its origin in the cultural characteristics of an organisation and it is these that provide the entire context and setting for the manuals and policies. It is important that directors and managers are aware of this and are able to assess the key aspects of organisational culture from the controls perspective. The three areas of questioning set out below should always be considered when assessing whether ...

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