Question

To ensure proper employee supervision and proper separation of duties, companies must develop and monitor an organizational chart. One corporation that did this found that out of 17,000 employees, there were 400 people who did not report to anyone and 35 people who reported to each other.

Why would unsupervised employees or employees who report to each other represent potential internal control threats?

Answer 1

To properly supervise the organization, the organizational chart is prepared. The organisational chart clearly states the responsibilities and accountability of employees. It clarifies who will report to whom. It is done so that every activity in the organization can be monitored and rectified. But the employees who do not follow the organizational chart and report to their superiors or those who only report to each other are creating barriers for the organization. Because if their activities are not being monitored then their errors can't be recognized and rectified. Their actions are threatning the internal control system and nullify the efforts of organization to take correctional steps when needed.