Internal controls spending set to increase

Research by Ernst & Young into the internal control and compliance strategies of 140 companies has revealed that the vast majority still plan to spend heavily in this area over the next 12 to 24 months.

Almost 90% of respondents said that investments in internal controls deliver business benefits by enhancing processes, 86% said it provides for a better understanding of major risk areas, while half said that it had a positive impact on investor confidence.

“A business’s internal control efforts are about much more than compliance,” the E&Y report, From Compliance to Competitive Edge: New thinking on internal control, claims. “When implemented and working effectively, they improve information reliability, improving decision making and driving competitive advantage. Yet controls seem to have gained a bad name for themselves as a burden – to budgets and management time – and are associated with unnecessary cost and inefficiency.”

Areas where companies feel that controls need to be strengthened include expanding into new international markets (59%); post-acquisition integration (58%); real estate and construction projects (55%); and IT implementations and upgrades (51%).