Question

Many companies do a poor job of documenting their internal control procedures. Why is it so important to do this no matter what size of the company? Why is it even more important for businesses like the fast food industry that deal with cash? Please cite an example of an industry that is more prone to internal weaknesses than others.

Answer 1

Internal control is important for the companies no matter what is the size of it because it is one of the major requirements of the Sarbanes- Oxley Act of 2002 which regulates reporting and testing of internal controls over financial reporting for public companies. Moreover, in private companies  also it is equally important because internal controls establish safeguards to business assets and minimize the opportunities of committing fraud and allowing errors to go undetected in daily operations of the business. Therefore, it is equally important for a big as well as mid or small size organization.

For example: The industry which has high volume of transactions and are complex is more prone to internal weakness than others. A food chain is more prone to internal weakness than an established manufacturing company.