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Recent advances in internal control: Soft control overcoming the limits of hard control

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Submitted   Jan 4, 2023
Published   Mar 29, 2023
Issue    Vol 4 No 1 (2023)
DOI   10.25082/FMB.2023.01.004

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Peter Yao Lartey corresponding author
Niagara Community Observatory (NCO), Brock University, ON, Canada
Isaac Gumah Akolgo
Simon Diedong Dombo University of Business and Integrated Development Studies, Wa, Ghana
Santosh Rupa Jaladi
Prin. L.N Welingkar Institute of Management Development & Research, Bangalore 560100, India
Selorm Ayeduvor
CSIR, Science and Technology Policy Research Institute, Cantonment, Accra, Ghana
Stephen Owusu Afriyie
IT Business, Ghana Communication Technology University, PMB 100, Accra North, Ghana

Abstract

Uncertainties and risks continue to pose a threat to governance and internal control, impeding public sector modernization and essential service delivery. Attempts to develop alternative strategies to meet desired results in highly bureaucratic institutional environments such as the public sector are intensifying because ideas and principles matter. This study advances informal "soft control" as a substitute for formal "hard control" in four dimensions: (a) creates a clear difference between "soft" and "hard" control; (b) designs key determinants of informal "soft" control; (c) limitations of formal "hard" control; and (d) a conceptual framework and hypotheses to support future empirical research and “operationalization” of the proposed constructs. Critical observations imply that the increasing cases of corporate malpractice and consequential non-alignments with best practises in recent times are sufficient evidence to suggest that formal control is incapable of mitigating financial crimes, irregularities, and preventing complex accounting scandals classified as white-collar fraud. The causes of these control failures are attributed to overreliance on "hard control" which primarily works with sanctions and the neglect of informal control mechanisms "soft controls". This condition has limited the ability of auditors to uncover systematic failures of controls that are process-specific, resulting in a partial and incomplete evaluation of internal controls. The study assumed a theoretical approach due to the lack of existing empirical research on “soft control”. However, this observations form a solid theoretical foundation for further discussions. We argue that "tone at the top," informal social control, organisational culture, ethical values, empowerment, and employee competence are effective substitutes for and complements to formal "hard" controls in preventing another Enron. 

Keywords
soft control, hard control, public administration, “tone at the top”

Article Details

How to Cite
Lartey, P., Akolgo, I. G., Jaladi, S. R., Ayeduvor, S., & Afriyie, S. O. (2023). Recent advances in internal control: Soft control overcoming the limits of hard control. Financial Metrics in Business, 4(1), 289-302. https://doi.org/10.25082/FMB.2023.01.004
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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

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