The Adequacy of Internal Corporate Controls

Abstract

In order for a corporation's activities and con duct to be what its top management wants, there must be ade quate internal corporate controls to assure that management knows what is, in fact, going on and that management's in structions are being carried out. The antitrust electrical cases, the heavy losses suffered by General Dynamics through its Con- vair division, and Chrysler's troubles over conflict of interests among its executives are illustrations which point out the fail ure of internal systems of control. In each case, top manage ment did not have the benefit of adequate internal controls so that it could prevent illegal or improper or unfortunate events from occurring, to the detriment of the corporation. These in stances suggest the timeliness of an inquiry into the adequacy of internal corporate controls in the large American corpora tions in order to ascertain what really is "the corporation."