The importance of optimal allocations of resources to the internal control effort of firms is necessary in a competitive environment following some initiatives mandating such efforts. Viewing the internal control effectiveness as a stock variable affecting the net benefits of the firm, we address the issue of the optimal path internal control outlays in a multiperiod setting. Our analysis highlights some interrelationships among the parameters in the model, in addition to providing a cross-point solution for switching to lower levels of outlays.
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