Corporate Governance: Internal Control Failure and Recommendations

This report focuses on the analysis of corporate governance, specifically addressing the failures of internal control within a company. It emphasizes the importance of effective internal control mechanisms to achieve organizational objectives and prevent fraud. The report identifies key issues arising from internal control failures, such as poor governance and negative employee attitudes towards auditors. It recommends that the board of directors strengthen the audit system, clarify ownership roles and responsibilities, and foster unity among employees. The report references relevant sources, including research on corporate governance from an Islamic perspective and auditing standards related to internal control over financial reporting. It highlights the need to address operational, employee, technological, economic, and compliance risks to improve corporate governance.

Running head: CORPORATE GOVERNANCE
Corporate Governance
Name of the Student
Name of the University
Author Note

1CORPORATE GOVERNANCE
Recommendations to the board on account of the failure of internal control
Internal control is a process, which helps, assures to achieve the organizational objectives
that are needed to be achieved for maintaining good governance. Internal control suffers in the
hand of internal fraud or theft in a company. One of the most effective way to prevent such
deficiency is to implement the basic rules of internal control. Internal control tends to fail when it
is not monitored or enforced to its maximum. Poorly designed controls fail as well (Cheffins,
2013). The best recommendation to the board of directors of Al Sharqiya in such situation is to
critically monitor and control all the compliances that are required for better governance. The
directors are advised to strengthen the audit system of the company so that they wrongdoings
occurring within the internal affairs of the company could be swept away. The ownership roles
and responsibilities must be defined and clarified in such hour of distress. Lastly, the board of
directors of Al Sharqiya is advised to bring the individuals department together so that the
employees could derive strength and a sense of unity (Alam Choudhury & Nurul Alam, 2013).
Issues to consider
On account of the failure of internal control, issues regarding poor governance and
negative attitude of employees towards auditors need to be tackled ("AS 2201: An Audit of
Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial
Statements", 2018). The probable deficiencies and weakness need to be identified to provide
appropriate remedy. The internal risks like operational issues, employee issues, technological
drawbacks and external risks like economic deficits, compliance issues with the government,
etcetera needs to be dealt with.

2CORPORATE GOVERNANCE
Reference:
Alam Choudhury, M., & Nurul Alam, M. (2013). Corporate governance in Islamic perspective.
International journal of Islamic and Middle Eastern finance and management, 6(3), 180-
199.
AS 2201: An Audit of Internal Control Over Financial Reporting That Is Integrated with An
Audit of Financial Statements. (2018). Retrieved from
https://pcaobus.org/Standards/Auditing/Pages/AS2201.aspx
Cheffins, B. R. (2013). The history of corporate governance. The Oxford handbook of corporate
governance, 46-64.