Internal Controls And Internal Control

1117 Words Jan 20th, 2015 5 Pages
Internal control plays an increasingly significant role in firms and many other organizations. Businesspeople, especially managers, pay more attention to internal control and its relationship with management (Krishnan, 2005). They tend to discover how internal control affects the operation of the companies. Although managers of some companies have doubts on the value of internal control, it directly helps managers to make open and effective management of the companies when designing, undertaking and optimizing their plans. The definition of internal control is presented in the first section. Then next section shows the importance of internal control, which mainly functions as risk assessment, effective communication and monitoring, …show more content…
Therefore, the system is worthwhile because it prevents the company suffering from the likelihood of fire and avoids financial losses. Internal control systems have been advocated as a mechanism for establishing high quality management (Altamuro et al., 2010). It is impossible to run companies without any risks. What managers need to do is to assess the possibility of the risk and take relevant measures to prevent it occurring. The model of risk assessment is applied to decide whether the control should be implemented. There is a tiny flaw of the internal control. From the example it can be seen that if the cost of purchasing the fire-prevention system surpasses the total value of the company assets, this kind of control will lose its significance. Internal control makes great contribution to reducing companies’ risks.

With internal control, exchange of information and instant communication enables people to carry out their responsibilities. Chester’s theory of contemporary management explains that the organization and its presence are based on effective communication and valid information (Fadzil et al., 2005). The way of exchanging information between the staff in Motorola companies is a successful example of communication. “Open Door” is one of the features because every employee is equal there. Any staff can contact their boss in various ways, such as writing recommendation letters or

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