Internal Control System and Activities - a Study with Albanian Companies

Abstract

This study examines and describes the effectiveness of internal control systems in Albanian small and medium size enterprises. We adopt the COSO framework definition for the internal control activities and, through a questionnaire, carried out a study of 86 Small and Medium Enterprises operating primarily in the area of Tirana, the capital and the industrial centre of Albania. The purpose of this paper is to study whether the SMEs in Albania have a sound understanding about the internal control activities and identify the most frequently used internal control activities. We find that the Albanian SMEs generally maintain transparent internal policies and regulations and that their employees are properly informed about these policies and regulations. Another finding is that the Albanian SMEs try to keep record of their employees’ trainings and achievement which is an important tool for personnel control. Furthermore these entities prove to have an adequate level of segregation of duties, which they maintain for a considerable time, this makes it easier for employees to learn and perform their tasks better in the long run as it creates stability and increases economies of scale. Finally we found that in the Albanian SMEs fraud reporting from employees is encouraged and adequate measures are taken to counteract them for the future.