In this paper, we will discuss the role of internal control in curbing corruption to emphasise the importance of a strong and effective internal control to curb the corruption or unlawful behaviour. Internal control is a process that designed to provide assurance to achieve efficiency and effectiveness of operations, reliability in reporting of financial statement and ensure compliance with applicable laws and regulations (ISSAI, 2013).
The role of internal control to restrain the corruption in organisation is to adopt the integrated control framework to institute the internal written policies and procedures in offer to provide reasonable assurance to management and ensure compliance with the applicable rules and regulations (National Internal
…show more content…
Control environment usually consist of the tasks, ethical values, behaviour, internal rules and policies, control procedures, standard norms and associated with integrity control mechanisms that impose to management’s practices which will occur at all levels and functions of the organisation. To curb corruption, the role of internal control system should establish and maintain a supportive control environment throughout the organisation. The control environment is the foundation of the internal control to provide discipline action and the assembly framework for both ethical and procedural commitment. This can be expressed as if the control environment did not strong and reliable, the overall of the internal control will be not effective as it supposed to be. The control environment will become effective once the people in the organisation aware of their level of autonomy and the obligation and responsibility to conduct the rightfully things are clearly defined (National Internal Control Framework, …show more content…
The organisation successfully case of we selected is Safran Group Company. Safran is major operation in industry of aircraft engine, rocket engine and aerospace-component. It is a French multinational company and headquarters are located in Paris. Since Safran is aware of the harmful consequences of corruption, for that reason, they have strengthened their internal control with strict trade compliance requirements. Safran was the first company in the French stock market index CAC 40 to be granted the anti-corruption certificate issued by the French technology information agency ADIT. It recognized the effectiveness of the process and internal control implemented by Safran in line with the world class anti-corruption programme (Safran, 2015). Those efforts can be highlighted from Safran had signed and cooperative with the following international forum business ethical
Internal controls is defined as a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance
Internal controls are in place to protect entities against theft from dishonest workers and outside predators. They are also an accurate series of checks and balances and are in place to find discrepancies.
Global Integrity is an organization based in Washington, D.C. which reports on international corruption trends (Heller, 2007). Global Integrity is exactly what is needed in order to combat corruption across the globe. Unfortunately, Global Integrity is not a source from which information is easily obtained by a normal citizen. In order to combat corruption, it is in the hands of everyday citizens to do their part to help. Corruption is not often fought by politicians, as many misinformed people would think, as they are often the ones partaking in these practices, or condoning them.
ensure that management is doing what it can to establish means of effective internal controls by having to report on them.
What is internal control? According to University of Phoenix, Axia College Internal Control and Cash (2009), internal control is all of the related methods and measures adopted within an organization to safeguard its assets and enhance the accuracy and reliability of its accounting records. The primary reasons for internal control are help companies protect their investments and merchandise against theft from everyone, including employees and to make sure that the accounting is done correctly and truthfully.
With the development of international business, more and more companies get large profits in multinational cooperation, also led to a serious corruption problem at the same time. One of the most famous is the Siemens scandal. Although there are many laws to stop transnational bribery, many companies have to rely on bribes to win contracts. Some managers consider the social resources are limited and the distribution exist competition. A bribe is the easy way to obtain the resources that the companies original may not get. Furthermore, some of the company 's products have serious quality problem, the leaders of production will bribe prosecutors. Then the products into the market smoothly, however, this behavior will lead to unfair competition
An organization that lacks a true culture of ethical compliance can create problems with integrity issues with stakeholders and customers. When a major company such as Enron, was structured their approach to ethics on the surface appeared to oppose progressive innovation. The policies and ethics programs were set up to protect the company and its shareholders. According to author Berenbeim, The Enron company had a detailed code of ethics it was not enough the organization needed to incorporate ethics and integrity throughout their corporate culture. Enron had to focus on business ethics issues raised by the conduct of the company’s directors, officers, accounts and lawyers (Berenbeim, 2002).
The development of a country depends generally on the work and values of its society. The image of a country can be severely damaged by certain actions and behavior of their citizens, like bribery. When a country is known as a corrupt nation, not only will the facade of the country be affected, but also the economy. Establishing measures to eradicate corruption are urgently necessary. Corruption has been around since the begging of time, but currently is more common in business, more specifically, international business. Although some organizations have been formed, and conventions have been signed in order to end it, corruption is still one of the mayor problems around the world. An ethical view might bring more insight to why bribery and corruption is not a moral act and why more severe measures should be taken into consideration.
In 2014, the “Clean Company Act 2014” was enacted. According to the Act, companies are responsible for the corrupt practices of their employees and can be held liable without a finding of fault. Bid rigging and fraud are prohibited in public procurement, as well as bribery of Brazilian public officials. If found guilty of corruption the companies can be suspended, dissolved or fined. Economic consequences
Concerning anti-corruption laws, the rising corruption cases draw critic against existing companies and legal provisions for contributing little to apply policies to stop corruption and bribery cases in the country. Similarly, fundamental flaws in the country corporate legal and laws processes are hindering regulators from prosecuting several companies concerning bribery of foreign government officials. The value of a corrupt free nation is depicted by the speaker pointing out corruption cases and advocating for integrity values within the society and the desire to see several corruption cases convicted. The speech then leads to a climax by calling on individuals to participate in anticorruption gatherings, forums, and activities.
The term “ethical business” is seen, by many people, as an oxymoron. This is because a business’s main objective is to make as much money as possible. Making the most money possible, however, can often lead to unethical actions. Companies like Enron, WorldCom, and Satyam have been the posterchildren for how corporations’ greed lead to unethical practices. In recent times however, companies have been accused of being unethical based on, not how they manage their finances, but on how they treat the society that they operate in. People have started to realize that the damage companies have been doing to the world around them is more impactful and far worse than any financial fraud that these companies might be engaging in. Events like the BP oil
Effective control process in an organization would help in gathering information about the process and the employees, this can further help the management whilst taking important decisions in terms of establishing standards to meet standards, measuring the actual performance, as well as comparing performance with the standards. It can further help the companies in achieving their optimum goals so that they can take corrective actions as and when required. The process controls in place and guide and provide the company with the required regulations of the company’s activities. Which can lead to the performance of the company, hence it will also help the organization in terms of monitoring and responding.
Global Challenge: Building the New Worldwide Enterprise. McGRAW-HILL Book Company Europe. NEELANKAVIL, James P. (2003). International Business Corruption: A Framework of Causes, Effects, and Prescriptions. Hofstra University Press.
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.
The existence of bribery and unethical behavior is rampant in the world market and may not change overnight. The question of bribery has been distilled in business literature as a question of ethics. In this situation at the airport with the customs officer, it is important to distinguish between business ethics and personal ethics. In a business ethics situation, the Foreign Corruption Practices Act would prohibit offering any bribe to the custom office – for example to free a shipment of goods that was lost in red tape (Pitman & Sanford, 2006). Most companies also have policies against bribery as well. In this situation, however the main issue at hand is that of personal ethics. When in a situation where your company is unknown and there is no business being conducted, normal business ethics and laws (including FCPA) do not apply only personal ethical standards.