How well do you really know internal control health check of your company ? How thoroughly are they checked when policies and procedures are updated? How do you ensure internal control efficiency is established and maintained? Are there any inefficiencies and control deficiencies your team has missed?
Effective and efficient designation and implementation in internal control can support the Company to prevent and detect potential control deficiencies.
Pertinent Examples
Krungthai Bank in Thailand found itself in the middle of a loan scandal after its executives approved illegal loans to clients who had significant political connections. These loans were facilitated by the bank’s failure to scrutinise its own books. As a result, the malfeasance continued over time, adding to the bank’s financial losses as well as the damage to its reputation.
Many overseas banks underwent similar issues. Lehman Brothers in the US, for example, failed to follow standard risk management procedures while engaging in unreliable subprime mortgage lending. The resulting collapse brought Lehman to bankruptcy, and helped to set off the 2008 global financial crisis.
These cases demonstrate how weaknesses in the design and implementation of internal controls can lead to financial reporting risks, operational risks, and compliance risks. To prevent such issues, the management and audit committee must establish strong internal controls, create a robust control environment, and ensure policies are consistently maintained.
Everything in Its Right Place
Companies today are complex structures with many moving parts, including their people, regulations, and systems. The management and audit committee plays a critical role in designing effective and efficient controls to detect and prevent operational risks, financial reporting risks, and compliance risks.
Grant Thornton’s Business Risk Services team comprises dedicated risk management and internal audit professionals. We provide market-leading solutions in process improvement, risk management, control, and governance for listed organisations, public sector bodies, the technology industry, and other sectors. Our services include internal audits, internal control assessments at both the entity and process levels, compliance reviews, outsourced internal audits, enterprise risk management, and internal audit transformation.
Note
This is the final article of an ongoing series entitled 6 Ways Your Business Can Fail: A Guide to Recognising and Avoiding and Avoiding Critical Threats to Your Company's Success.
To read the previous article in the series, click here
To download the full series as a report, click here
