Organizational Culture
Introduction
Over the years, culture has shaped human existence as well as all the other aspects of human life. Culture can be defined as the set of moral values, beliefs and understanding that is mutually understood by the members of an organization. As such, organization culture relates to what members of an organization share in common. An organization culture can be revealed easily by observing what members of an organization wear to work, the time they report and leave work, behavior at work, what they talk about and even how the office space is divided among many other aspects (Joshi, 2013). Organization culture is important in that it plays an important role in that it ensures that organization is run to achieve it vision, mission, goals and objectives. An organization culture captures both the internal and external environments of the organization.
Each and every organization has its own organizational culture that differentiates it from the others. Internal accounting control is a system that is used to safeguard and encourage sound management practices within an organization both financially and in general. Currently, people, mostly accountants, have started to take note of the influence the values and beliefs of an organization have on the use and the production of internal controls (Biegelman & Bartow, 2006). It is also common knowledge today that any activity within an organization will have a direct effect on an organization’s accounting operations. For instance, an organization that maintains high quality standards is more likely to be accepted within its market and also be successful within the industry (Joshi, 2013). As such, organization culture mainly affects the organization’s accounting practices and controls. Given the role of organization culture in effectively running the organization, there is a high correlation between an organization’s culture and its internal accounting control.
Hypothesis
Positive organization culture leads to internal control system efficiency and effectiveness.
A positive organization culture promotes compliance
A positive organization culture promotes monitoring of internal controls
Positive organization culture leads to internal control system efficiency and effectiveness.
Financial accounting information is meant to be consumed by shareholders and other stakeholders and hence it becomes subject to demands of legislations and high standards. In an organization where there is positive organization culture, there is a more likelihood of effectiveness and efficiency in the internal controls mainly because of the high levels of professionalism being portrayed. The organization culture is mainly influenced by the leadership of the organization (Biegelman & Bartow, 2006). Organization culture is mainly spearheaded by the company’s leader (chief executive officer). The organization’s vision, mission, goals and objectives, together with strategy are what hold the organization’s staff together. In cases whereby there is strong leadership, clear direction, consultations before embarking on change and constant communication among the leadership and employees, there is always positivity in the organization culture. This will also mean that the different departments within the organization will have a uniform culture and hence working towards achieving the organization’s goals and objectives. This will ultimately have an impact on the effectiveness and efficiency of the organization’s business operations. As such, in a positive organization culture environment, the accounts department will have a clear direction on how to use and produce accounting information in order to meet the goals and objectives of the organization. This will spark collaborative efforts between the staff and also inspire professionalism. In such cases, also, there is also a likelihood of fewer risks related to internal controls.
A positive organization culture also affects the attitudes and beliefs of employees in carrying out their day to day activities (Biegelman & Bartow, 2006). In organizations with a positive organization culture, employees are rewarded for their performances and there is no discrimination in whatever aspect whatsoever. Also, there is minimal harassment and no aggressive work routines. As such, the employees are motivated to carry out their duties as per their job descriptions. In such cases, also, there are limited cases of legal requirements being compromised or non-adherence to the set code of conduct. As such, individuals are motivated to follow the required channels in preparing the financial controls and also reporting them. This way, the efficiency and effectiveness of the internal controls are greatly enhanced.
Many organizations all over the world are grappling with the issues of fraud and corruption and a lack of transparency; issues that have had major repercussions for the organization. On many instances, such cases of fraud relate to a lack of standards and legislation related to internal controls (Kuchta & Supken, 2011). A lack of business ethics is a major factor in the growing number of cases of fraud and lack of transparency in organizations. Business ethics is revealed in all aspects of the business conduct, the strategies that are put in place and even how the employees carry themselves in their daily activities. Business ethics goes beyond the legal requirements and may easily reveal whether the organization values traits such as honesty, integrity and equality. Business ethics also shows whether the employees of the organization are able to work as they are required under minimum supervision. A code of conduct is one of the ways by which an organization ensures business ethics are adhered to in the company (Kuchta & Supken, 2011). A code of ethics stipulates what is required of an employee in conducting his or her work or interactions with the other employees. An organization that has a clear and well defined code of conduct always has a strong and positive organization culture. On the other hand, an organization that lacks or has failed to implement a code of conduct is bound to have a negative organization culture. In cases of a lack of code of conduct, there are a high number of cases on lack of transparency, arbitrary decisions, complete and total disregard of the laws and regulations and individualism. An organization lacking a code of conduct is usually at a very high risk and may easily crumble or experience huge losses that may greatly affect its operations (Kuchta & Supken, 2011). In cases where there is very little compliance with the laws and regulations governing the internal controls and the code of conduct, questions that always arise relate to the authenticity and the reliability of the internal controls (financial statements).
A positive organization culture promotes compliance
All firms must adhere to compliance quality which is a tool for internal controls procedure. As a result of the different business practices, many firms employ internal accounting control systems to review their practices and also train their staff on how to achieve their goals and objectives via the policies that have been put in place (Joshi, 2013). A positive organization culture will ensure that the staff works within the realms of the organization policies and external legislations, which would further enhance the reliability of the internal controls. Compliance quality is an aspect that all firms is very critical to an organization or a firm and organizations must make sure that the internal controls comply with the organization policies and the legislations on internal controls. A company must find a way in which to ensure compliance so as to achieve its mission and vision. A positive organization culture offers a good way by which an organization will achieve compliance and thereafter reliability of internal controls. A negative organization culture, on the other hand, promotes non-compliance and hence leads to an organization failing to achieve its goals and objectives.
A positive organization culture promotes monitoring of internal controls
For there to be effectiveness within the internal controls of an organization, there must be in place a system that provides frequent feedback. In so doing, the organization can know where it is going wrong or right with regards to the use of the internal controls. An organization with a positive organization culture will ensure that there is constant communication between the accounts department and leadership on the administering of the internal controls (financial controls). Such a culture would also promote the practice of conducting risk assessments so as to know the position of the organization both internally and externally. The regular monitoring of the controls gives an organization an edge given that it can know its strengths and weaknesses in relation to filing and reporting of financial information.
Organization culture has a vital impact on internal accounting control systems of an organization (Kuchta & Supken, 2011). By understanding and conducting assessments of the organization culture, one can easily know how the internal controls of the organization are working. There is no way the internal controls of a company can function effectively or efficiently without the support of a positive organization culture. A positive organization culture supports the internal control systems while a negative organization culture negatively affects the internal controls. Improving the organization culture is a very big step in improving the internal control systems.
Bibliography
Biegelman, M. T., & Bartow J. T., 2006. Executive roadmap to fraud prevention and internal control creating a culture of compliance. Hoboken, N.J., Wiley
Joshi, G. 2013. Management information systems. New Delhi: Oxford University Press, 2013.
Kuchta, D. & Supken, J., 2011. The influence of culture on accounting systems. Journal of Intercultural Management. Vol. 3, No. 2, October 2011, pp. 57–75
