Internal control: Progress and perils;

              Internal Control: Progress And Perils
Alan J. Winters Dan M. Guy
American Institute of Certified Public Accountants
"Progress might have been alright once but it has gone on too long."
Ogden Nash
Over the last five years, internal control has been a matter of widespread interest and vigorous debate, a subject where action is fast-paced and still gain-ing momentum. During the two preceding decades, however, internal control was an off-and-on again parochial topic, subject to the vagaries of groups who perceived it to be relevant and beneficial to their objectives. These groups included entity managers and owners, internal and external auditors, regulators and legislators, private sector policy makers, and independent commissions. In varying degrees, each of these groups has proffered internal control as a solu-tion to a number of problems.
The intense attention devoted to internal control over the last five years (since 1986) has undoubtedly made progress in our understanding of what inter-nal control is and how it can be used. Professional standards, private sector pro-posals, legislative and regulatory initiatives, and practice and academic research have addressed many conceptual and practical issues. However, not everyone would agree that all of these developments represent progress. Although some problems have been solved, some have not, and other problems have been creat-ed. In other words, internal control theory and applications have progressed, perhaps in an evolutionary leap since 1986, but perils remain.
The purpose of this paper is to survey the progress and perils related to inter-nal control developments over the last five years. The content of both categories is likely to be disputed and the coverage will probably be incomplete. Even the co-authors of this paper are not in total agreement about what is progress and what is peril. Nevertheless, our objective is to review the most prominent advances and the most serious unresolved problems associated with internal control over the last half-decade. We leave it to our reviewer to propose our misclassifications and omissions.
Some of the developments discussed in this paper are neither new nor little known. They are presented for perspective and in an attempt to be thorough. Other developments we discuss, however, are emerging and not yet widely known. We believe that both areas contain pressing questions in need of research. As in many other areas of accounting research, research in internal control lags behind the needs of, or is overlooked by, policy makers and practi-tioners. This is likely a problem with the process used to identify and communi-cate policy and practice issues, stimulate research about them, and to foster an
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