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Do controls really matter to investors and public? Should they?


Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Let's break the question into two pieces -

Do control's matter to investors - Yes. It is for this reason why we primarily invest in foreign equities via an American Depository Receipt traded on the NYSE or we invest in emerging markets via a fund managed by a large US investment house vs. investing directly in an emerging market stock exchange. Investors trust the safety of the US market and its participants, regulated by the SEC. In this example I am making controls and regulation synonymous.

Do control's matter to the public - Yes, they are expected and assumed. The existence of a control is not a reason to invest, but a situation of fraud committed because there was a lack of controls is a reason to avoid an investment.

Hope that helps.

Topic Expert
Keith Perry
Title: Director of Global Accounting
Company: Agrinos, Inc.
(Director of Global Accounting, Agrinos, Inc.) |

A good way to think of controls is: Know where the doors and windows are, and check to see if they are locked.

Controls help in two ways: at any size company, controls keep down the risk of individual transgressions. At larger companies, they have the added benefit of reducing the risk of group transgressions. This latter case is, I feel, often misunderstood; you can have a group of individuals at a big company each acting in good faith, but ending up doing (collectively) something quite awful.

Controls aren't perfect, to be certain, especially as implemented in a one-size approach that we do with SOX or similar. They do, however, beat the heck out of assuming that good management negates the need for controls.

scott graves
Title: CFO
Company: Armstrong Teasdale LLC
(CFO, Armstrong Teasdale LLC) |

Do you think that Investors and the public care about Fraud and inaccurate financial statements? Any Enron shareholders out there?

mark savitskie
Title: cfo
Company: marketplace homes
(cfo, marketplace homes) |

Bernie Ebbers, the former CEO of Worldcom, once told his Chief Audit Executive that he didn't want to see the words "internal control" appear in an audit report. Need I say more.

Controls are a fact of our lives, without them we would be quickly done in by all the risks that surround our personal lives. And business is no different. Well thought out controls protect the company from the myriad of risks that it encounters on a daily basis. Line management sometimes believe that controls inhibit their ability to be productive and effective, and for poorly devised controls they may be correct. But cost-effective internal controls, applied in a manner to mitigate business risks, should be the foundation of a profitable business.

Ray Calabrese
Title: Treasurer
Company: Interim Treasurer
(Treasurer, Interim Treasurer) |

MF Global is a good example why controls are important and why investors care about them.


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