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The introduction of corporate governance in modern day business was realized after
the collapse of a number of large multinational companies such as the Enron, Tycon
and WorldCom in the early 2000s. The reasons for corporate collapse were
weaknesses in governance practice in relation to internal control systems, financial
reporting quality and audit quality. The importance of corporate governance in
ensuring effective stewardship of public resources has influenced my decision on this
area of study namely: “examining the effectiveness of internal control systems in
ensuring good corporate governance to organisation”.
The study used simple sampling techniques whereby interviews, questionnaires,
observation and documentary review for data collection; it also applied qualitative
and descriptive research approaches to analyze data and interpret results.
The research findings indicate that an effective internal control system provides
reasonable, but not necessarily 100% assurance for the safeguarding of assets, the
reliability of financial information, and compliance of laws and regulations.
Therefore the cost of control systems should not exceed the benefit to be derived
from them.
Also the findings indicate that the internal auditing functions face many challenges
during implementation of daily responsibilities. These challenges include lack of
sufficient resources, lack of independence, non implementation of auditors’
recommendations, and lack of co-operation from management and other
stakeholders.
The findings of respective managements in organizations covered, which maintain
effective internal audit functions, show transparency, honesty and readiness to be
accountable for wrong doing including unethical practices. The result of the research
showed that the organizations which have installed weak internal control systems,
have systems that cannot guarantee effective implementation in promoting good
governance practice. |
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