Internal Control Definition
Report) in United Kingdom, were established to investigate the reason behind the large number of business failure, frauds, and audit failures.
This effort has been followed by the introduction of the definition of internal control by the committee of sponsoring organizations of the Treadway Commission (COSO) in 1992, 2013 as “a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance”. The Canadian Institute of Chartered Accountants (CICA) introduced its definition to internal control as “procedures, processes, and methods implemented by management to ensure the company 's efficiency
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Miles, Snow, Meyer, Coleman (1978) presented four strategy types (defenders, prospectors, analyzers, reactors), each of these strategy types depicts for an organization, its common strategic orientation, a combination of its structure, its culture, and the processes leading to implementing this particular type of strategy. Taking the defenders (companies that focus on improving the efficiency of operations, with limited capabilities of innovation) strategy as an example, Table 2 illustrates the main features of such strategy and its control ramifications.
- Size, the increasing growth of an organization implies more problematic control issues (Merchant, 1981, 1984), other researchers indicate that by the increase of size of an organization, its control processes become more sophisticated and specialized (Bruns and Waterhouse 1975; Ezzamel 1990; Libby and Waterhouse 1996; Hoque and James
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It remains to note that the already discussed four characteristics (strategy type, size, organization structure, and environmental uncertainty) are subject to a quantification process and should be appraised at an actual or approximate value in order to determine their impact on the internal control system, which in turn should be designed or redesigned to cope with those characteristics. This means that such characteristics are considered tangibles for this purpose, while the fact diverges from that as some of those characteristics like the organizational structure and the environmental uncertainty include some intangible issues related to the psychology of human being nature and its subsequent behavior. This implies that the design of an internal control system is subject to both objective and subjective
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