Question

1. Why does a small business rely so much on the owner or manager to provide oversight?

2. Do you think that a small business or a large business is more likely to have fraud? Why?

3. Why do businesses still experience losses even though they have implemented internal controls?

Answer 1

1) Yeah excatly! Small business management requires business owners to provide oversight for so many functions in the business. Like sales, purchase, customer service, marketing and product development etc.
But when we come into large organizations often delegate management responsibilities to employees. And also they ensures individuals provide oversight for business functions in accordance with the style of business owner.

2) Yes.. Fraud can hurt small businesses in very big way because they lack basic accounting controls, tend to have a high level of trust within the small organization. there are many time of fraud in small business is there and few are:

1. Online banking
2. False invoicing
3. Invoice email

What should small businesses can do to protect themselves from such fraud is that they must take this seriously.. should have one eye always on financial results which are using financial experts.

3) The only reason is yet small business owners just don’t listen! yeah they are not ready to obey all this.. there are many way to Although each business is different. Some limitations are still there in all internal control systems. like Judgment : The effectiveness of controls will be limited by decisions made with human judgment under pressures to conduct business based on the information at hand.  Breakdowns: Even well designed internal controls can break down.