ABSTRACT
Internal control has always been regarded as a priority strategic corporate governance defense mechanism and its role was further enhanced by the recent corporate governance reforms. Modern corporate governance legislation, for instance, requires the disclosure of three reports related to the effectiveness of a company's internal control systems (SOX, 2002): the management's report on the effectiveness of internal controls, the auditor's opinion on management's assessment of internal controls, and the auditor's opinion on the effectiveness of internal controls (Lopez et al., 2006). Recent corporate governance legislation may actually be seen as the culmination of a century of development of internal control definitions, applications, and procedures, and they summarize such process development through their requirement of the internal control, its periodical review, and the annual report of its efficiency (Heier et al., 2004). Internal control is supposed to help the organizations to achieve their performance and profitability objective achievement in a most structured and effective way, to prevent loss and fraud, to ensure the reliability of its financial disclosure, and to comply with laws and regulations, hence avoiding damage to reputation. Consequently, with an appropriate control system, the organization is supposed to be assured of accomplishing its goals with no surprises along the way. Although companies with more serious company-wide internal control problems seem to be of smaller size, younger, and weaker financially (Doyle et al., 2007), internal control may prove to be beneficial to every organization, by encouraging them to stay alert and remain attentive to their environment.
