Culture and internal control Activity 5
Feedback for Activity 5
You may have come up with a number of examples. But let’s take an example of an internal audit that has found that the control over managers’ expenses is weak, exposing the organisation to an unacceptable level of risk from unanticipated, inaccurate or fraudulent claims. Previously managers have been able to sign off their own expense claims up to a limit of £500 without providing receipts. A new control has been introduced that now requires a counter-signature from a line manager for claims over £100 and for all claims to be supported by receipts. This control may have an adverse impact on culture by creating resentment among managers and a feeling that they are no longer trusted by the senior team.
The key message here is that micro-level controls can have implications on the organisation’s culture – for good and bad. In introducing new controls, the organisation needs to consider the likely impact of the change on the culture, and manage this impact. More positively, control activities can be used not only to make systems and processes more effective, but improve the culture even if it is in a small way.