Kindly help with the financial implications of presence and non presence of internal control in organisations.  I mean what will be the implications of organisations having or not having internal...

Kindly help with the financial implications of presence and non presence of internal control in organisations.

 

I mean what will be the implications of organisations having or not having internal control

Asked on by afekai

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idijohn's profile pic

idijohn | Student, Undergraduate | (Level 1) Honors

Posted on

The importance of Internal Control cannot be over-emphasized. But it is a very necessary evil that is needed to stabilize the financial activities of the firm.

When there is no Internal Control in an organization, the financial implications will be:

  • No trust in the Financial Report of the firm by her shareholders (existing or potential)
  • The employees can/will help fold up quickly the firm without notice (because they are given free hand).
  • Transactions cannot be tracked
  • Fraud will be rampart
  • Unauthorized transactions will take place
  • Assets of the firm might be stolen one by one by employees without notice
  • Management goals and budgets will not be met, etc.

When a very good Internal Control is in place, a lot of things which is the backbone of the firm will fall into place because management will have proper contol over everything that goes on in the firm. These includes:

  • Trust on Financial Report from Shareholders (existing and potential)
  • Fraud Tracking is easy and will be reduced to the bearest minimum
  • All transactions are tracked and authorized
  • All assets are well protected
  • Goals and budgets will be met

There is more and more benefit if the is a proper Internal control in place in a firm.

Sources:

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