SONY: Internal Control - Essay Example

According to Gilbert, and Martin 2004, pp.306, internal control is a process for assuring the achievement of an organization's objectives, operational efficiency and effectiveness, dependable financial reporting, and compliance with regulations, laws, and policies. In the case of SONY, some of the aforementioned roles of internal controls have not been achieved as a result of various internal control weaknesses and deficiencies. In the recent story carried out by the New York Times, the corporation is at a very high risk of incurring huge losses if measures are not taken to protect the gains that the company has made.

Significantly, the company has been marred will an intolerable control environment. The management has failed to enhance effective communication leading to an adverse change in attitude among employees. In addition, the company has failed to identify inadequacies that pose a significant risk of loss and inaccuracies in the financial management department.

According to the audit conducted in the year 2013 (Farewell, Byron 117), SONY Company has not been conducting regular assessments of its internal control system and hence the management may fail to detect a fault in good time. Furthermore, failure to conduct a regular assessment will make some of the control systems obsolete leading to huge losses.

Best Practice

An effective control system should focus on diligence and effective communication that is geared toward changing employees’ attitudes toward the control system. (Susan 543) declares that the control system should be regularly examined and updated to reduce the risks emanating from obsolete technology. In this case, the control system should be several strands ahead of the technology used by fraudsters and dishonest employees. Risk reviewing and monitoring should be highly regarded. In this case, the management should constantly monitor the internal control system in order to identify areas that require advancement. This reduces the chances of incurring a material risk that would cause financial loss if it takes place.

In conclusion, the best practice in internal control system involves incorporating all stakeholders through communication and engagement in all levels of management.