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Kauppakorkeakoulu | Laskentatoimen laitos | Laskentatoimi | 2013
Tutkielman numero: 13447
Complexity approach on internal control over financial instruments - case of a SOX-compliant non-financial sector player
Tekijä: Tuomainen, Krista
Otsikko: Complexity approach on internal control over financial instruments - case of a SOX-compliant non-financial sector player
Vuosi: 2013  Kieli: eng
Laitos: Laskentatoimen laitos
Aine: Laskentatoimi
Asiasanat: laskentatoimi; accounting; valvonta; control; rahoitusinstrumentit; financial instruments
Sivumäärä: 145
Avainsanat: Complexity theories, financial instruments, internal control, complexity management, COSO, SOX
Tiivistelmä:
Objectives for the study

The main objective in this study is to answer the three research questions: (1) what are the critical success factors driving effective internal control over financial instruments during an era of growing complexity, (2) what are the most considerate challenges in current internal control over financial instruments, and how can those be effectively managed, and (3) since the case company considers its internal control over financial reporting to be effective, then could its approach on control to be considered to align with the complexity approach constructed in this study, and what implications emerge? Ultimately, the purpose is to construct a discussion paper on what a flexible internal control over financial instruments stands for in the contemporary world.

The Complexity Approach and research methodology

In the literature review of the study, first an understanding of financial instruments as an object of control is formed. Then, SOX as a driver for more advanced internal control is introduced, and one of the most utilized frameworks in the world, the COSO Internal Control - Integrated Framework is presented. Thirdly, based on review of prior research, the greatest challenges relating to financial instrument transactions are categorized into five main areas. By examining these five fields further through a lens of complexity, i.e. the notions made by complexity theorists, a common factor driving such challenges is discovered and a novel approach on internal control over financial instruments constructed. The complexity approach on internal control over financial products is tested in practice by conducting in-depth semi-structured interviews with nine professional with different backgrounds following a revelatory single case study method.

Findings and conclusions

The study resulted in four main findings: (1) the COSO framework is considered to serve as a solid foundation for contemporary internal control, despite not being a critical prerequisite for it, and especially the importance of ensuring a strong control environment is highlighted in regard to firms being exposed to great levels of complexity. (2) The five areas of greatest challenges identified from prior research are considered valid, yet human factor in particular is regarded as a key contributor in effective control. (3) Effective internal control over financial instruments or in general is discovered not to require every employee in an organization to have embraced a complexity approach. Rather, it is enough that the employees within the high risk areas, overseeing the actions of others have adopted a complexity approach on internal control. (4) A model for managing complexity in contemporary internal control over financial instruments, including the critical success factors in control and related challenge management, is developed by combining the findings form theoretical and empirical parts of the study.
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