Question

Based on your research discuss the impact the organization's structure and culture have on internal controls over financial reporting. What characteristics would you say lead to better internal controls within an organization? Be sure to define internal controls from an accounting perspective. Include (1) reference

Answer 1

The organization’s structure and culture always have a upper-hand in attaining the internal controls and have effective financial reporting. The organization’s management and its employees adoption to the controlling decisions and adopting the updated technology, processes and corrective actions undertaken to bring sharpness in the financial reporting will show the culture of the organization. Better adoptability culture of the organization and its employees will produce a more and more effective financial reporting.

The Internal Control from the accounting perspective is to have evenly distribution of the accounting control between the accounting persons so that none can over-power on any financial transaction and have advantage hampering the organization’s objectives.

The characteristics that would lead to better internal controls are:

1) Moral Value: The managerial and employees skills and moral value towards the favoritism of controlling environment.

2) External and Internal risk assessment: The management’s assessment of the risks both external and internal and over-coming to fulfill the objective of the organization.

3) Adoption: The acceptance of the controlling activities to over-power the errors and bring improvement in the financial reporting.

4) Connectivity and communications: The better channels of communications to spread in the decisions taken to have effective internal control and reporting.

5) Proper follow-up: The proper follow-up by the management of the internal control decisions taken for betterment of the reporting.

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