Hi Keek,
This is a little more subtle than the other questions, but since you
liked my answers to them, I'll try again. (And thank YOU for
replying!)
"What is the relationship between ethics and internal control techniques?"
It reminds me of the statement that is falsely attributed to Lenin:
"Trust is good, but control is better."
If everyone in an organization were perfectly ethical and honest (and
knew exactly what they were supposed to do), one could surmise that
there would be no need for internal controls. But people are not all
like that (and sometimes they cannot be blamed for not knowing what to
do, if they weren't told = no adequate job description and operating
procedures).
Internal controls provide a way of identifying when and where errors
occur, and should also result in feedback that improves operating
procedures.
The techniques of internal controls consist very basically of
determining who did what, be it signing checks or ordering goods,
authorizing overtime, issuing keys to secured areas (physical or EDP)
and being able to identify when they were used, i.e., who could have
been there and done that at a time when maybe he shouldn't have.
Sometimes the persons subject to internal controls feel that this is a
sign of distrust, spying, infringement on their privacy; things that
people consider to be unethical. And, admittedly, sometimes the
attitudes of persons working in internal control can further this
impression.
As an erstwhile internal auditor, I believe that internal controls are
there to protect people (and the organization, of course) by helping
to assure that inadvertant mistakes do not occur; that when they do
occur, that they can be identified as such; that errors - mistaken or
intentional - cannot be blamed on the wrong person.
From this approach, internal controls are very ethical, and the
operating procedures necessary to allow them provide by themselves a
control that errors are minimized (e.g., having a check signed by a
different person than the one who filled in the amount and beneficiary
on the check, allowing the signer to control that this agrees with the
amount on the invoice to be paid).
I have known managers who did not understand this, who found the
necessary procedures were superfluous (too expensive): "We don't need
that. There haven't been any errors. And if there are any, we'll fire
the person." (Which one?)
Is that an answer to your question? If you would like an explanation
on some point, maybe I can expand on the subject.
Regards, Myoarin |
