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Posted on April 23rd, 2014, by

In the contemporary business environment, accurate accounting and auditing are essential for the successful business development of organizations. Companies cannot ignore the role of accounting and internal control systems because they affect consistently their financial and marketing performance. Organizations that have problems with internal control system are likely to have considerable problems in their business development, while the lack of internal control can undermine the position of any organization. Therefore, organizations should be concerned with the development of effective internal control systems to minimize the risk of errors and to maximize the effectiveness of their performance.

In actuality, there is no ideal internal control system. Therefore, any internal control system may have its drawbacks as well as strengths but organizations should always work on the improvement of their internal control systems to eliminate their limitations and enhance their effectiveness. In this regard, the staff size limitation is very important because often organizations have excessive staff and they fail to maintain effective internal control over the performance of all the personnel. As a result, organizations will deteriorate their performance and they may have considerable difficulties with identifying where the problem actually is. For instance, some employees may fail to perform effectively, but the lack of the internal control may prevent the organization from identification of these under-performing employees. Hence, the organization may stumble in its development, even if the overwhelming majority of employees work well.

Furthermore, undetected errors are another limitation of the internal control system. The lack of internal control or poor internal control may lead to the failure of the organization to detect errors. In a long-run perspective, undetected errors may provoke serious problems because the organization may focus on the wrong direction in its development and make erroneous strategic decisions. As a result, the organization will stumble in its business development.

Irregularities in accounting also contribute to the limitation of the effectiveness of the internal control system because irregularities lead to the fragmentary reporting and the company cannot obtain accurate information on its actual financial and marketing performance. Hence, irregularities lead to the misleading information obtained by the executives of the organization. As a result, they can develop a wrong marketing strategy and fail to assess the position of their company adequately.

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