Document Type : Original Research
Authors
1 Professor at the University of Tehran and financial, economic and investment strategies consultant
2 university of tehran
3 Kharazmi University
Abstract
Internal controls, as the foundation for establishing an efficient governance and management system in economic units, play a key role in achieving organizational goals, improving the reliability of financial reporting, preventing and detecting fraud, and increasing information transparency. Valid international frameworks such as the Sarbanes-Oxley Act and auditing standards, while emphasizing the five basic components of internal control (control environment, risk assessment, information system, control activities, and oversight), place the ultimate responsibility for designing and implementing these systems on the board of directors and executive managers. Control weaknesses can lead to financial distortions, including errors and fraud, which have often been the root of the collapse of large companies. Internal and independent auditing plays a complementary and advisory role in this structure and evaluates the health of controls for stakeholders. Internal controls are divided into preventive, detective, corrective, directive, and compensatory controls in terms of type, and administrative and financial controls in terms of nature. Inherent human and organizational limitations, the dynamics of the business environment, and the possibility of collusion and management override of controls always make their effectiveness relative. The findings of this study show that the establishment and continuous assessment of internal controls is not only a legal and professional requirement but also a strategic necessity for maintaining the survival of the organization, promoting transparency, and providing assurance to stakeholders; and the quality of internal controls directly affects the scope and extent of the auditor's reliance on evidence in the audit of financial statements. Finally, a culture of accountability, continuous training, and improvement of control processes are considered vital elements for increasing the effectiveness of this system and dealing with emerging risks.
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