There are several possible causes of internal control failure. The UK Turnbull report (in paragraph 22) gives examples of causes of failure but this list is not exhaustive.
1. Poor judgement in decision-making. Internal control failures can sometimes arise from individual decisions being made based on inadequate information provision or by inexperienced staff.
2. Human error can cause failures although a well-designed internal control environment can help control this to a certain extent.
3. Control processes being deliberately circumvented by employees and others. It is very difficult to completely prevent deliberate circumvention, especially if an employee has a particular reason (in his or her opinion) to do so, such as the belief that higher bonuses will be earned.
4. Management overriding controls, presumably in the belief that the controls put in place are inconvenient or inappropriate and should not apply to them.
5. The occurrence of unforeseeable circumstances is the final cause referred to in the Turnbull Report. Control systems are designed to cope with a given range of variables and when an event happens outwith that range, the system may be unable to cope.
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