Question

Discuss the similarities and differences of internal controls reporting requirements between public and private organizations.

Answer 1

Firstly necessary of Internal financial control is for both type of organisation either private or public, because both form of organisation working at greater level or ground level faces following risk:

1. Fraud risk

2. Information technology risk

3. Tax Compliance risk

4. Legal risk

5. Labor Shortage risk

6.Customer risk

7. Reputational risk etc.

by analyzing above risk factors it is identified as encounter at both private and public company level, although impact will be minimal or higher as per the organisational structure and volume of operations and transactions.

1. Similarities of Internal control: Keeping in mind the above illustrated risk factors similar in both private and public organisation..

- Accuracy of information and its reliability: Attribute of accuracy is applicable in both private and public company scenario. If the control is effective the level of accuracy will be high, So requirement of Internal control for providing accuracy and reliability is same.

- Review of Financial statement: Review of financial statement is required in both public and private organisation while looking for frauds. Both private and public organisation has to review their financial statement and appoint internal or external auditor as per the requirement. Their Appointment, meetings with audit committee and their control proposal are similar in both form of organisation as audit committee in both organisation deals for same objective of true and fair view of financial statement.

2. Difference:

- Trading of Stock: Public company share are traded more frequently then private company but it depends upon the market conditions as well as company financial status, but exchange regulation are more strict in case of public company rather than private organisation, so accordingly internal control required to be in place to adhere the same. .

- Audit Requirements: Audit requirements are very stringent in case of public company as compared to private organisations. Reviewing of Financial statements of public organisation, because while looking for frauds or authenticity of Financial statements auditors need to check the viability , efficiency and effectiveness of the Internal control of the organisation, but in case of private organisation while evaluating or reviewing financial statements their is no requirement to look for internal control deficiencies.