Effective internal controls are good for business, As a public, it’s important for internal control over financial reporting and the effectiveness of its internal control system. The internal control principles to its suppliers, balancing risks and controls.

The risks brought about by not tackling the dire working environments at its suppliers’ facilities are as follows:

  • Loss of public trust;
  • Loss of future investment funds;
  • Injury to the company’s reputation;
  • Increased legislation;
  • Violation of laws;
  • Default on a project;
  • Bad publicity;
  • Drop in the stock price.

We needs to create a control-conscious environment. The control environment is the control consciousness of an organization where people are committed to following an organization’s policies and procedures and its ethical and behavioral standards.

The followings are the action steps that would help as and its suppliers to encourage ethical behavior:

  • Set up policies and procedures, in this special case, labor standards at its suppliers’ factories;
  • Communicate up and down that the policies and procedures are important and should be followed;
  • Make suppliers fully aware of their responsibilities to enforce internal control measures;
  • Document key policies and procedures;
  • Send key employees of the suppliers to ethics and internal control training;
  • Evaluate suppliers not only on the quality of products but also performance related to internal controls;
  • Take disciplinary or other actions for non-performance, discontinuance of contracts, for example;
  • Monitor the internal control system on an on-going basis,

Controls come with costs. To continue being successful, We needs to balance risks, controls and control-related cost.

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