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What impact the organization's structure and culture have on internal controls (from an accounting perspective) over...

What impact the organization's structure and culture have on internal controls (from an accounting perspective) over financial reporting.

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Answer #1

Impact of an organisations structure on internal control is manifold since the company's structure determines the authority to carry out financial transactions. If the company has a decentralised mechanism of authority structure then the internal controls have to be very tight since authority is given that at smaller roles as well. Also, segregation of duties, maker and checker concepts ,setting tighter rules and procedures for employees to follows also is a part of strong internal control.

A company which has a strong culture and promotes honesty, integrity , motivates employees to perform better and rewards according to performance and protects whistle blowers , has relatively better financial reporting and reduces the possibility of a employee fraud. These principles have to be followed from across the top management to the lowest grade employee to demonstrate strong ethical values.

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