Evaluating the effectiveness of internal control systems: Evidence from financial and audit performance data

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

Internal control systems are fundamental to effective corporate governance, financial clarity, and operational integrity. This study examines the efficacy of internal control guidelines across a group of companies by combining a theoretical framework with quantitative analysis informed by financial and operational data. A mixed-methods approach is employed, integrating empirical analyses derived from company-level data assessed in Microsoft Excel with a comprehensive literature review. Key performance indicators, such as audit results, profitability metrics, and compliance outcomes, are utilized to assess the effectiveness of internal controls in guaranteeing accountability and performance. The findings align with prior research (Doyle et al., 2007) showing that internal control weaknesses are significantly associated with restatements and lower-quality reporting, while also supporting evidence that effective controls can reduce audit costs over time (Aobdia, 2019). The results indicate that effectively structured and regularly enforced internal control systems are associated with improved operational efficiency, stronger financial reporting, and fewer discrepancies. The study also considers the potential effects of control strength on stock performance and investor confidence. It concludes with practical recommendations for improving internal control implementation and highlights the broader implications for auditors, regulators, and executives seeking to align internal control methodologies with long-term organizational goals.

Keywords: Internal Control Systems, Audit Fees, Financial Reporting Quality, Corporate Governance, Restatements, Operational Performance

Authors’ individual contributions: Conceptualization — N.D.B.; Methodology — N.D.B. and D.V.; Software — D.V.; Validation — D.V.; Formal Analysis — C.G.K. and A.E.F.; Investigation — D.V.; Resources — A.E.F.; Data Curation — C.G.K.; Writing — Original Draft — N.D.B. and D.V.; Writing — Review & Editing — C.G.K. and A.E.F.; Visualization — A.E.F.; Supervision — N.D.B.; Project Administration — N.D.B.; Funding Acquisition — C.G.K.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G34, M41, M42

Received: 11.08.2025
Revised: 23.09.2025; 31.10.2025
Accepted: 06.11.2025
Published online: 07.11.2025

How to cite this paper: Belesis, N. D., Kampouris, C. G., Fousteris, A. E., & Varouxis, D. (2025). Evaluating the effectiveness of internal control systems: Evidence from financial and audit performance data. Corporate Board: Role, Duties and Composition, 21(3), 76–86. https://doi.org/10.22495/cbv21i3art7