Strategy, control activities, monitoring and effectiveness

Abstract

Purpose -First, this paper aims to provide empirical evidence of the interaction between the components of an internal control system. Second, it seeks to integrate work from the field of strategy and that on the internal control system from the field of auditing. The purpose of this paper is to enable a more profound understanding of how different strategic orientations may influence effectiveness, depending on the components of the internal control system. Design/methodology/approach -Data were collected through an online questionnaire and analyzed using multiple regression analysis, i.e. a three-way interaction model. The result was a usable sample of the opinions of 741 managers working in Finland. Findings -The results indicate that, for prospector firms, high degrees of internal control activity and low degrees of monitoring ensure a greater effectiveness of the internal control system. On the other hand, for analyzers a high degree of internal control activity and high degrees of monitoring lead to a highly effective internal control system. In addition, our findings indicate no significant differences between defenders and analyzers.Research limitations/implications -The research is limited to only two components of the internal control system, namely, internal control activities and monitoring. Future research is needed to examine the interactions of other components of the internal control system. Practical implications -The paper demonstrates the need for managers to be aware of the drivers of the effectiveness of the internal control system and the relationships essential to drive effectiveness, especially when operating in different strategic fields. While all components of an internal control system are vital, this study shows that a good fit between them can lead to improved effectiveness. Originality/value -This is the first empirical study that has used a three-way interaction method to study internal control structures and their effectiveness in an organizational context. Coupled with previous work, it suggests the need for both researchers and practitioners to examine the interactions of an internal control system and how they impact on the effectiveness of that system.

Role of integrity system, internal control system and leadership practices on the accountability practices in the public sectors of Malaysia

“…Internal control is a multidimensional concept and has been discussed in many ways in the management control literature (Agbejule & Jokipii, 2009;Bowrin, 2004). It is not solely a procedure or policy that is performed at a certain point in time.…”

Examining the Effect of the Organization’s Internal Control System on Organizational Effectiveness: A Jordanian Empirical Study

“…This issue is addressed very often and at several levels within the country , in spite of the fact that Jordanian human resources are of the best skills in the region and of Jordan's remarkable reputation in several fields for example the ICT and regulatory sectors (Kateb et al, 2014;Altamony et al, 2016). The internal control system consists of all the variables that may contribute some way or another to the success or failure of any organization and by establishing a robust internal control system the organization promotes efficient and effective operations to produce quality products and services that are consistent with its objectives and goals (Agbejule & Jokipii, 2009). …”

Do Internal Control Activities Adversely Influence the Profitability and Solvency of South African SMMEs?

“…Regardless of the type of internal control activities which are implemented in business entities, these activities need not only to function appropriately, but should also be adaptable to changes in applicable environments (e.g. economic environments, political environments and technological environments) to optimally mitigate risks (Agbejule & Jokipii, 2009). By doing so, these activities will reasonably assure management that the relevant business entity will attain its objectives in the foreseeable future which, in turn, relate to the fulfilment of associated economic responsibilities, social responsibilities and/or environmental responsibilities (Rodgers, 2010) (Buys, 2012) (Bechtold, et al, 2013).In most cases, the manner in which economic responsibilities are fulfilled will ultimately determine whether a business entity will fail or not (Amendola, Giordano, Parrella, & Restaino, 2017) (Small, Smidt, & Joseph, 2017).Notwithstanding the above, in a South African SMME dispensation, two local studies (Siwangaza, 2013) (Bruwer, 2016) (Bruwer, Coetzee, & Meiring, 2017) found that internal control activities are regarded as ineffective and/or inadequate as they do not provide reasonable assurance surrounding the attainment of relevant pre-determined business objectives in the foreseeable future.…”