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Internal control mechanisms are fundamental to organizational governance; particularly, to the agency relationship associated with decentralization of decision rights. Management accounting and organizational literatures provide conflicting predictions on the association between decentralization and internal controls, with some research arguing that internal controls be tightened to mitigate the risks associated with greater decentralization of decision rights while other work avers that tighter internal controls defeat the purposes of decentralization. In this chapter, we argue that managers choose these two organizational design variables jointly. Capitalizing on a unique database of control practices in the purchasing and payment process within the procurement function, this chapter examines the relationship between control tightness – a critical characteristic of internal controls – and decentralization. Using a simultaneous equation model, the study finds that decentralization and internal control design are endogenously determined. Tight control is negatively associated with the level of decentralization, while decentralization has a positive effect on the tightness of control. These results reconcile the apparently contradictory results relating these two variables. The chapter also finds that decentralization and tight control mechanisms operate both independently and synergistically to improve performance.

This study aims to evaluate the moderating impact of corporate governance on the relationship between internal control mechanisms and financial performance.

The study employs a structured questionnaire to collect data from 250 top managers of rural banks in the capital of Ghana. Cronbach alpha value and Fornell-Larcker tests were performed to assess the reliability and validity of the data used. The study adopted a partial least square structural equation model (PLS-SEM).

The results show that internal control and corporate governance both have a direct positive and significant impact on financial performance. Furthermore, the interaction of internal control and corporate governance also has a positive and significant impact on financial performance, thus confirming the moderating role of corporate governance in the relationship between internal control mechanisms and financial performance.

This implies that organizations need to strengthen their corporate governance procedures to increase the efficiency of their internal control systems, which would ultimately lead to an improvement in their financial performance.

The present study innovates by assessing the moderating role of corporate governance in the nexus between internal control mechanisms and financial performance. This moderating effect assessment implies that corporate governance may not only affect the technical implementation of the internal control structures but will subsequently make an impact on the overall performance of the organization.

The purpose of this paper is to explore various mechanisms for controlling overhead, as informed by a framework based on transaction-cost-economics (TCE).

Development of framework for controlling overhead and field study about Dutch public sector organizations for exploring and enriching this framework.

Central steering with a provider-user interface was often seen as the most desirable control mechanism. Although central steering without such interface was used in about half of the overhead functions, their users argued that the priorities of these functions were insufficiently in line with their needs. There was little support for internal market control, because it would increase the administrative workload of internal calculations, and it could lead to undesirable differences in overhead use among the primary services departments. Moreover, line managers are often more focused service quality than costs.

The framework based on TCE formed a suitable starting point for reflecting on the control of overhead functions, but the empirical findings pointed to revisions in the case of internal market control concerning resistance to administrative workload and avoidance of differences in the supply of internal services.

Inspiring public sector managers to reflect on the match between overhead control mechanisms and characteristics of overhead functions.

A theoretical underpinning and empirical exploration of a variety of overhead control mechanisms in the public sector.

This article examines the power of management control mechanisms as “inscriptions” for bringing the interests of organisations within a purchaser–provider network into alignment.

The study contributes to accounting and accountability literature in hybrid organisations by applying actor-network theory to a case study organisation. This enables an analysis of how a government agency, operating as a social service provider to the community, developed and used management control mechanisms in its intra-organisational units to ensure its operations were aligned with the expectations of inter-organisational networks in a purchaser–provider context. Data were collected using open-ended interviews and by examining internal accounting and management reports, government archival records and newspaper articles.

Analysis of the results demonstrates that inter-organisational network control was internalised within the provider organisation because of the ability of the controls to function as inscriptions that influenced organisational actions. The authors conclude that the network control travelled across boundaries over time and was assimilated by the provider organisation to become its internal management control mechanisms.

A single case study of a government service provider agency may limit the generalisation of the findings to other hybrid entities or networks. The significant practical essence of this study lies in the diversity within the results that offer a rich representation of the impact of purchaser–provider arrangements on internal organisational systems within a hybrid public sector setting.

The outcomes enhance knowledge of how a hybrid government agency developed, mobilised and institutionalised its management control mechanisms to ensure the activities of one party are consistent with the other parties' expectations within a network.

The purpose of this paper is to explore how organizational climate impacts the speed of strategic change (SSC) for firms in transitional economies and whether if the effects were contingent on internal control mechanisms.

A theoretical model including five constructs is developed. The questionnaire survey is deployed to scale main constructs, including organizational climate, such as open communication and hierarchical bureaucracy, internal controls such as strategic and financial control, and SSC. The moderation regression method in five steps is employed to test all hypotheses using the survey data from the 120 sampled Chinese firms.

The findings show that open communication has a positive effect on SCC, whereas hierarchical bureaucracy has a negative effect on SSC. Furthermore, strategic control positively moderates the relationship between open communication and SSC but negatively moderates the relationship between hierarchical bureaucracy and SSC; meanwhile, financial control negatively moderates the relationship between open communication and SSC but positively moderates the relationship between hierarchical bureaucracy and SSC.

This research integrates organizational climate and internal control mechanisms into the framework of strategic change to investigate how firms achieve fast strategic change through aligning organizational climate with proper organizational control mechanisms. The findings advance the authors’ understanding of the organizational climate, internal controls, and strategic change literature, and offer valuable managerial insights for managers in situations when strategic change is of central importance in the transitional economies.

We examine the empirical relationship between direct equity agency costs measures and corporate governance control mechanisms to control equity agency costs. We measure the three direct agency cost proxies commonly used in the literature: the operating expense; asset turnover; and selling, general, and administrative (SGA) ratios. Internal corporate governance control mechanisms examined are inside ownership (IO), outside ownership concentration (OC), the size of the board of directors (BODs), and the composition of the BODs (proportion of nonexecutive (NE) directors and separation of chief executive officer (CEO) and board chair). The external corporate governance control mechanism examined is the size of bank debt (short-term debt). Univariate and multivariate tests reveal that the only statistically significant relationship between corporate governance control mechanisms and direct equity agency cost measures is the negative relationship between the proportion of IO and direct agency costs. The asset utilization ratio (asset turnover) ratio is the best proxy for direct equity agency costs and can be useful for event studies of announcement period excess returns.

This study aims to examine how auditors perceive the influence of crucial fraud prevention factors in deterring financial statement fraud within the corporate sector. Additionally, this research explores the mediating effect of fraud awareness in elucidating the impact of ethical leadership and internal control systems on preventing financial statement fraud.

The study used an online survey, targeting a sample of 141 professionally qualified auditors with at least one year of practical experience in the field. The researchers used “Structural Equation Modeling (SEM)” to examine relationships between latent variables using partial least squares structural equation modeling. The study investigated the impact of whistleblowing systems, fraud awareness, ethical leadership, internal control systems and corporate governance on fraud prevention.

This research finding provides evidence to the corporate sector by establishing the significance of fraud awareness as the most influencing factor in preventing financial statement fraud. Furthermore, the combined explanatory variables account for 77.4% of the overall variance in financial statement fraud prevention. The study reveals a partial mediation effect of fraud awareness on the relationship between the internal control system and financial statement fraud prevention.

This research finding may assist in developing an effective fraud prevention programme to mitigate fraud instances and improve financial reporting quality. In the corporate sector, each organisation should clearly specify the policies on whistleblowing systems, fraud awareness training, internal control systems and corporate governance. To foster a comprehensive fraud prevention programme, the leaders should enforce these policies with employee support.

This research integrated crucial elements to develop a new theoretical framework for investigating financial statement fraud prevention within the corporate context. Accordingly, this research framework provides a more in-depth explanation of preventing financial statement fraud from an auditor’s perspective. Additionally, this research is the first to explore the mediating role of fraud awareness in influencing the effectiveness of the internal control system in preventing financial statement fraud.

This study aims to investigate the coordinated impact of regulations on the predicted probability of a banking crisis in Africa.

The study used the dynamic panel instrumental variable probit regression model of 52 African economies over the period 2006 to 2018.

The authors observe that banking crisis is persistent for few years but dissipates in the long run. The results show that board mechanism and ownership control are important in reducing the likelihood of banking crisis. The authors found a negative impact of regulatory capital and monetary policy on the predicted probability of a banking crisis while regulatory quality was not strong in reducing the likelihood of banking crisis. There was also evidence to support that regulatory capital and monetary policy augment the negative impact of board mechanism and ownership control on the predicted probability of a banking crisis.

The limitation of the study is that it did not explore all measures of regulatory framework and how they impact banking crisis. However, it has an advantage of using alternative measures of regulations in a banking crisis probability model. Therefore, future studies should include other macro-prudential regulations, regulatory environments and supervision and observe how they are coordinated to reduce possible crisis in a robust methodological framework.

The research has policy implications for monetary authorities and policymakers to set coordinated regulations through internal banking mechanisms that are relevant in sustaining banking system stability goals. Countries in Africa should strengthen their quality of regulation in such a way that it can play a strong and complementary role to a robust internal control mechanisms, so as to maintain stability in the banking system. In general, regulators and policymakers should design greater coordination of external and internal regulations through a single regulatory framework and a common resolution mechanism that make the banking system more robust in curbing possible crisis.

The policy implication of the study is to build banking confidence in the society.

This study analyses the interactions of different components of internal and external regulatory framework in helping to reduce the probability of a banking crisis in Africa.

This paper aims to determine whether there is a relationship between intellectual capital and social capital and internal control weaknesses and assess the relationship between the variables of intellectual capital and social capital and internal control weaknesses.

The statistical population consists of 1,309 firm-year observations from 2014 to 2020. The research hypothesis is tested using statistical methods, including multivariate, least-squares and fixed-effects regression.

The results demonstrate a negative and significant relationship between intellectual capital, social capital and internal control weaknesses. The study also finds that increased intellectual and social capital quality improves human resource utilization, control mechanism, creativity and firm performance. The results also show that intellectual capital and social capital enhancement will reduce internal control weaknesses in the upcoming years.

This paper is the pioneer study on the relationship between intellectual capital and social capital and internal control weaknesses in Iran, carried out separately and in exploratory factor analysis. This paper considers intellectual capital components for theoretical factor analysis, including human capital, structural capital and customer capital. Internal control weakness is assessed based on financial, non-financial and information technology (IT) weaknesses.

This paper aims to analyse the governance structure of monasteries to gain new insights and apply them to solve agency problems of modern corporations. In an historic analysis of crises and closures it asks, if Benedictine monasteries were and are capable of solving agency problems. The analysis shows that monasteries established basic governance instruments very early and therefore were able to survive for centuries.

The paper uses a dataset of all Benedictine abbeys that ever existed in Bavaria, Baden‐Württemberg, and German‐speaking Switzerland to determine their lifespan and the reasons for closures. The governance mechanisms are analyzed in detail. Finally, it draws conclusions relevant to the modern corporation. The theoretical foundations are based upon principal agency theory, psychological economics, as well as embeddedness theory.

The monasteries that are examined show an average lifetime of almost 500 years and only a quarter of them dissolved as a result of agency problems. This paper argues that this success is due to an appropriate governance structure that relies strongly on internal control mechanisms.

Benedictine monasteries and stock corporations differ fundamentally regarding their goals. Additional limitations of the monastic approach are the tendency to promote groupthink, the danger of dictatorship and the life long commitment.

The paper adds new insights into the corporate governance debate designed to solve current agency problems and facilitate better control.

By analyzing monasteries, a new approach is offered to understand the efficiency of internal behavioral incentives and their combination with external control mechanisms in corporate governance.