Question

Some people feel that controls in small businesses (typically owner-operated with less than 20 employees) are dysfunctional, in that they create resentment and loss of morale without producing many benefits. Employees generally feel that the owner lacks trust in them, the control activities impose additional work, and/or that control procedures result in inconvenient and inefficient work practices.

Control procedures implemented in small businesses are generally ineffective and only belong (and only effective) in large organisations where management is separated from the operational activities of the organisation.

REQUIRED: Do you feel this is a valid statement in respect to the implementation of controls in small businesses? Briefly support your position with reasons. If you feel that you agree with some parts of the statement but not others, briefly discuss the parts you agree and disagree with and provide reasons for your position. Without limiting your discussion, you should include an explanation of what is meant by a system of internal control, the objectives of a system of internal control, the limitations of a system of internal control, and relate these issues to the question asked

Answer 1

This is partially valid & partially invalid statement

Internal controls will also be beneficial to small businesses, it is for mitigation of risks in the business operations

The Controls established should require constant review & revision in order to be effective.

Yes, the employees may feel resentment & loss of morale, but the same can be changed by telling them the advantages of implementing the internal controls.

So, the Internal controls can be used both in small & big organisations.

The objective of internal controls is to mitigate the risks in the business operations it can be done both in small & big organisations.

There can be Override of Internal controls by employees through collusion, this type of collusion can be easily done in small organisations.