Internal Control

Apr 15, 2016

Good corporate governance, by its nature, demands effective systems of internal control. Shareholders expect those charged with governance of the company to manage the risks the company faces and to put controls in place to deal with such risks.

The UK Corporate Governance Code and Internal Control

A principle of the UK Corporate Governance Code is that a company's board should "maintain sound risk management and internal control systems".

The Code requires that the board monitors the company's risk management and internal control systems and, at least annually, carry out a review of their effectiveness, and report on that review in the annual report.   

Other International Frameworks on Internal Control

US
Committee of Sponsoring Organisations of the Treadway Commission, US (COSO)

Hong-Kong
Internal Control and Risk Management - A Basic Framework (2005)

Further Reading on Internal Control

Improving Organisational Performance and Governance - How the COSO Frameworks can Help,  COSO, February 2014

Evaluating and Improving Internal Control in Organisations, International Good Practice Guidance published by IFAC, June 2012.

Internal Control from a Risk-Based Perspective - August 2007, IFAC

Internal Controls - A Review of Current Developments - August 2006, IFAC