Internal control re-design: an exploratory study of Australian organisations

This field study examines internal control re-design in eight Australian organisations. Interviewees emphasise the importance of building control into the system; whether control is built into the culture of the organisation's environment (e.g. integrity and ethical values, accountability), or computer controls built into the information system. The new patterns of accountability associated with empowerment mean that traditional internal accounting controls such as multiple layers of authorisations and checking (which typically occurred prior to an activity) are being replaced with control procedures designed to monitor in real time or after the event. As expected, many of the traditional accounting controls (e.g. multiple layers of authorisation, cross-checking, supervision, segregation) are of diminished importance for effective control. Our results provide some practical guidance to organisations embarking on control system re-design, as well as assistance to auditors in designing appropriate audit procedures for a changing control environment. Implications for auditing standards are discussed.