This document provides examples of good and bad control environments. Examples of a good control environment include a fair reward and punishment system, clear separation of CEO and board chair positions, empowering employees through involvement in decision making, and establishing codes of conduct. Examples of a bad control environment are unrealistic targets that pressure employees, lack of integrity among management, unclear policies and procedures, and failure to prosecute fraud.
This document provides examples of good and bad control environments. Examples of a good control environment include a fair reward and punishment system, clear separation of CEO and board chair positions, empowering employees through involvement in decision making, and establishing codes of conduct. Examples of a bad control environment are unrealistic targets that pressure employees, lack of integrity among management, unclear policies and procedures, and failure to prosecute fraud.
This document provides examples of good and bad control environments. Examples of a good control environment include a fair reward and punishment system, clear separation of CEO and board chair positions, empowering employees through involvement in decision making, and establishing codes of conduct. Examples of a bad control environment are unrealistic targets that pressure employees, lack of integrity among management, unclear policies and procedures, and failure to prosecute fraud.
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