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Best Examples of Good and Bad Control Environment

Examples of Good/Effective Control Environment


1. Fair rewarding and punishment system
2. Clear separation between the positions of CEO and Chairman of the board
3. Empowering employees by getting them involved in decision making
4. Management set clear and realistic targets for employees to achieve
5. Good communication channels between board of directors, top-level management
and employees at all levels.
6. Providing support to employees
7. Treating employees fairly and with respect
8. Employees’ performance is evaluated fairly and good performance is rewarded
9. Having clear organizational structure so that everyone in the organisation knows
who is responsible for what and who should report to whom
10. Having an independent audit committee that monitors the performance of internal
auditors and external auditors
11. Management is leading by example and is having integrity
12. Having an effective HR department within the company
13. HR department conducting background checks on employees and management to
prevent criminal activities and appoint only staff members with enough integrity
14. Communicating objectives and tasks clearly to employees
15. Board of directors and top management are committed to competence and to
employing only employees and leaders that are qualified enough and suitable for the
job
16. Reward employees and management fairly according to their performance
17. Provide clear guidance to employees and management to do their job
18. Everyone in the organisation is kept informed about the company’s strategy and
mission
19. Establishing a clear reporting line where employees and management know who to
report to
20. Regular monitoring of employees’ performance
21. Establish code of conduct and make sure employees and management understand it
22. The board of directors are ensuring that the financial statements are reliable and are
true and fair (i.e. reflecting the true and fair performance of the company)
23. The board of directors are discharging their responsibilities effectively and are
protecting shareholders rights
24. The board of directors care about effective internal control system and are regularly
evaluating the effectiveness of the control system
25. The board of directors ensure that financial reporting is true and fair
Examples of Bad/Ineffective Control Environment

1. Putting too much pressure on employees to achieve unrealistic targets


2. Management abusing power to achieve personal gains
3. Complex and unclear organisational structure
4. Unclear policies and procedures with lack of guidance to employees on how to
follow them
5. Management is treating employees unfairly and with disrespect
6. Lack of board of directors and/or audit committee participation
7. No fair system for rewards and penalties
8. Management is lacking integrity and behaving unethically
9. Management do not care about staff development and training
10. The board of directors do not monitor management’s performance
11. Fraud perpetrators are not prosecuted
12. Rewards do not align with the efforts and achievements made by employees and/or
management
13. Management and employees are committing fraud
14. The board of directors do not care about integrity and ethical values
15. The board of directors do not take proper disciplinary actions against those who
behave unethically
16. Management are giving themselves credit for others’ achievements
17. Unclear company’s objectives and goals
18. Lack of communication between top management and employees
19. No separation between the position of CEO and the chairman of the board
20. Top management is not emphasizing the importance of integrity and business ethics