This paper discusses the importance of internal control in a business, using the example of the collapse of Baring PLC, the oldest bank in England.
Written in 2007; 1,142 words; 5 sources; MLA; $ 39.95
Paper Summary:
The paper explains that internal control is defined as a process that ensures effective operations with reliable financial reporting in compliance with applicable laws and regulations. The paper discusses how the collapse of Baring PLC is a good example of failure of internal control. The paper describes how Nick Leeson, a trader in derivative trading, lost close to $1.7 billion in open ended derivative contracts established in the name of Baring PLC. The paper shows how a failure of internal control allowed him to run such huge losses without any checks over a period of 3 years. The paper emphasizes that poorly monitored or haphazardly developed internal controls may make the difference between the success or failure of any business.
From the Paper:
"The Internal Control is defined as a process that ensures effective operations with reliable financial reporting in compliance with applicable laws and regulations. An internal control system has to protect business's assets, encourage efficient operations, generate reliable accounting information and comply with company policy to make it difficult for a dishonest employee to commit fraud. [Lavery et al, 2000] estimate that U. S. businesses loose $400 billion due to fraud and theft by managers and employees each year."
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