Internal Controls Companies Need to Be Aware Essay

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Internal Controls

Companies need to be aware of the varying influences that are acting upon their organization. One method of examining the current situation is to divide the perception into ideas and influences that are arriving from the external environment and those that are internally controlled. Internal controls are important because they rely on leadership, courage and skill for these actions to take hold. The purpose of this essay is to prepare a comprehensive checklist for evaluating controls. The essay will use Louwers et al. (2007) basic five tiered framework to create this checklist and ensure that it can indeed be used for practical and pragmatic purposes at the internal business strategic level.

The checklist is divided into 5 distinct sections: Control Environment, Risk Assessment, Control Activities, Information and Communication, and finally, Monitoring. Each component of this checklist plays an important role in ensuring that a company or organization is on the right track in controlling their internal environment.

Part 1: Control Environment

The first part of internally controlling an organization is to get a firm grip on the business' environment. This would include such things as the ethics, integrity, leadership philosophy and human resources plan . Knauss (2010) suggested that "whatever a management team can do to engender that trust with customers, with suppliers or with whichever constituency it's dealing with -- consistent with a set of values and principles that it just will not violate -- is only to its long-term benefit.

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" Establishing core principles and following them provides a sense of honesty and consistency that customer, vendors and others certainly can appreciate and will draw them closer to the organization.

Structuring the organization in the right fashion must be done correctly as well or much energy and time may be wasted. It is important to evaluate the processes with an honest approach and keep the emotional temptations at bay. This preliminary step will ensure that the rest of the internal control checklist is in correct accordance with the objectives, goals and intentions of the leadership of the organization and can provide the ability to establish or maintain a competitive advantage within the chosen industry.

Part 2: Risk Assessment

Risk assessment and risk management are integral parts of any internal control checklist. Threats to the security and well-being of the institution all can be….....

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"Internal Controls Companies Need To Be Aware" (2013, September 16) Retrieved July 2, 2025, from
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