Chapter 5: Management and Internal Controls - Setting the Right Tone

Your management qualities set the tone for your entire department. Do your employees go through the motions, or do they follow through and do the right things, in the right way, no matter what? Are they working together with a common focus? It all stems from you.

Explore the relationship between effective management characteristics and internal controls.

Manager Qualities	Internal Control Implication
Leadership Managers guide team members and encourage them to work toward meeting the organization’s goals.	Tone at the Top If the tone set by management upholds honesty, integrity and ethics, employees are more likely to uphold those same values. Lead by example. Communicate and promote ethics and values. Encourage reporting of inconsistencies. Reward integrity.
Plan and Delegate A good manager devises well-thought-out plans, divides the task into subtasks, and delegates them to accomplish the plan efficiently, while also giving the delegates an opportunity to excel. Each delegation then presents an opportunity for oversight and monitoring - similar to the supervisor review that takes place during everyday activities.	A Process - Not Merely Procedures, Policies and Separation of Duties Internal controls are built into the organization; they are not an added feature. Since they are part of the culture, internal controls are considered with each activity.
Expertise A good manager possesses complete knowledge of his or her field and is confident about that knowledge.	Opportunities for Improvement By fully understanding the work environment, effective managers are able to identify opportunities to enhance existing controls.