Electronic copy available at: https://ssrn.com/abstract=2974430
Study of the contribution of management control system in
strengthening the internal and external control function: case of
Tunisian SMEs
Affes Habib
Faculty of Economics and Management,
University of Sfax, Tunisia
affeshabib7@gmail.com
Absrtact
Considered a long time strategic value because of its importance, management control has
become the cornerstone of the fact that it is source of potential improvement progress to all
types of businesses. It is a function that motivates those responsible and encourages them to
carry out activities that contribute to the achievement of the organization's objectives.
Often, managers need, in addition to a management control system, an increasingly effective
internal and external control system that allows them to better manage their companies and
provides them with reasonable assurance about the achievement objectives.
Electronic copy available at: https://ssrn.com/abstract=2974430
Facing a global economy characterized by open markets, trade liberalization and the advent of
information technology; Companies are forced to question their management control
practices, as well as their organizational model, in order to improve their performance and be
competitive, a prerequisite for their sustainability. The purpose of this paper is to study the
evolution of management control practices in response to the new needs of companies that are
confronted with turbulence in their environment. The illustration will be based on an
empirical validation in the Tunisian context. It is therefore a response to a number of
problems of companies for which the search for solutions is necessary: the increase of the
costs, and the disorganization of the services within the company.
The survival of such a company necessarily involves improving their performance. Therefore,
management control can be perceived as an improvement in the economic performance of the
company. It is a tool for efficiency, when the targets are met and efficiency, when the
quantities obtained are maximized from a Amount of means.
In order to control increasingly complex situations, it was necessary to create a management
control function whose main instruments can be constituted by: accounting with two general
and analytical components, budget management, dashboard ... Etc.
Our questions are based on the following questions: What tools, methods and models of
management control should be implemented in order to reinforce the effectiveness of internal
and external control?
1. Evolution of the concept of management control
Management control is therefore the process by which managers ensure that resources are
obtained and used efficiently (in relation to objectives) and efficiency (in relation to the
means employed) in order to achieve the objectives of the organization. This decision-making
process is a process of accompanying and deploying the strategy
The term "management control" has evolved in the same way as that of management
accounting. In other words, management control can not be carried out without proper control
of management accounting. This notion of control was born with the Industrial Revolution , It
is imposed in the company when applying division of labor and division of labor. The
systematic implementation of a system of control of the activities of each function proved
Electronic copy available at: https://ssrn.com/abstract=2974430
In its initial form management control to a quantitative character based on budgetary control,
cost accounting and reporting. This model was adopted by American companies (Dupont de
Nemours, General Motors), European and international. Its main characteristics can be
summarized as follows:
A financial measure of performance: The use of ROI (return on investment) ratios in management control originated with Dupont de Nemours and General Motors. ROI
reconciles operating income to the value of assets used and is in fact an expression of
the return on capital employed. This ratio is broken down into several ratios to
demonstrate that performance depends on both the level of result and the turnover of
capital. In the spirit of the traditional management control models, any decision must
be taken on the basis of this ratio, a rejection rate is defined below which no
investment project is selected and a minimum rate is defined which Makes it possible
to evaluate the performance of different responsibility centers.
Existence of centers of responsibility: In order for the objectives of the organization to be achieved through the action of the decentralized units, it is not necessary to exercise
a tactful control of their daily tasks but to delegate to them the necessary management
authority In the form of specific objectives. This delegation of authority requires
organizing the company as a responsibility center.
The need for planning: The planning process requires identifying different horizons: A long-term objective for the strategic objectives, a medium-term horizon for the
identification of the means to be implemented and the definition of the objectives
more Tactical, and finally a short-term horizon for the planning of concrete actions
within the framework of the preparation of the annual budget
2.Definition of management control.
Management Control Systems (MCS) as defined by Anthony (cited by Langfield-Smith,
1997) is the process by which managers ensure that resources are obtained and used
effectively and efficiently in the accomplishment of the organization s objectives . MCS is a
system used in an organization which collects and uses information to evaluate the
performance of the organizational resources that will eventually influence the behaviour of
the organization to implement organizational strategies. This paper will look into issues
within MCS such as transaction cost economics and transfer pricing. Also considered in this
mechanism in organizations, business performance measurement systems as well as
balance-scorecard with its implementation issues. Management control system (MCS) is a system that
provides useful information for managers to do their duties. This information helps
organization in performance. (Otley. 1999) MCS was first described by Anthony (1965). In
his study, he distinguished the management control system from strategic planning and
operational control. Management control (MC) itself is defined in many ways such as: a
combination of tools and process that influence on actors behaviors within an organization to
achieve organizational objectives.
In any organization, management control is used to deploy strategy As well as its execution
by all its members. Influenced by behavioral currents,
The modern management control has extended beyond its traditional functions described As
instrumental, to become a global tool for steering organizations. Many Authors share this
reflection (Lorino, 2001).
(Lorino, 2001)described organizational control as the set of mechanisms on which managers
rely to control the process of decision-action results. In this context, one of the goals of the
control is to model this process, in order to better define and understand the general
objectives. In this sense, management control is an organizational control whose tasks are the
following:
ensure that the construction of action plans is in line with the plan operational;
Assist managers in choosing the assumptions necessary for the implementation of the plans
Consolidate plans to prepare budget negotiations;
Establish budgets on the basis of selected plans;
Kaplan and Norton (2008) agree that management control is a tacit vehicle or a catalyst for
organizational sustainability, by sharing all the actors belonging to the " Organization
controlled the elements of performance which underpin this sustainability.
In the public context, management control is a very recent discipline that is gradually taking
shape within these institutions. Over the last decade, control in the public services was a
control by regulation and procedures, which corresponds to mechanical control. (Burlaud and
Simon, 1997,)
3.The objectives pursued through management control
There are many objectives for an organization to set up a management control system. They
objectives pursued by a public company differ from those of a private enterprise. Demeestère
(2005) argues that a private firm is interested in power relations between individuals
participating in the same value chain. However, a public organization is interested in the
relationships between stakeholders involved in the same public policy.
In order to achieve the objectives set, the organization must assign a strategic action plan,
regrouping the various actions that have been chosen. This action plan should be
With strategic objectives, means, a date of implementation, a manager and a steering system.
Thus, in terms of explaining objectives, Demeestère (2005, p.32) argued that "when one does
not explain his expected future results, one can hardly be reproached for not having achieved
them".
Measuring results against targets remains a difficult task. At one time, management
controllers are recruited to identify and explain these discrepancies. But the role of the
management controller has improved from a control of the reliability of the figures to support
for management and performance analysis. This first role, which Lorino (2005) describes as
simple "quantitative measures" since it consists only in making comparisons, contradicts the
new role of the Controller who is bound to draw conclusions from the judgments made
Collectively and take into account a multiplicity. Complex of objectives and constraints.
Lorino (2005) wonders if we need to measure performance or rather evaluate it, knowing that
the ability to model the link between resources and results is a fundamental issue to be solved.
This leads us to think about the types of performance that the company expects to achieve by
using management control tools. Despite the sometimes social vocation of the public
organization, managers can not deny the relationship between social responsibility and
economic performance in their actions. In this relationship between global responsibility and
economic performance, management control instruments represent internal mechanisms little
explored in the literature. Meyssonnier and Rasolofo Dastler (2008) mention that these
devices are of two types: purely accounting instruments (cost measures, calculation of
margins, interpretation of deviations) or more general but non-homogeneous indicators
constructed for Measure the overall responsibility of the enterprise.
4.The place of management control in the organization.
The management control is a true receptacle of information, it is at the center of all the
information flows of the organization. It receives, processes, analyzes, explains and transmits
to others the information received. Its place in the organization is therefore essential and has
The size of the organization,
From its mode of operation (decentralized or not),
Available means,
Objectives pursued by senior management.
In some organizations, management control is located within the finance department, either as a full
responsibility or as a shared responsibility when the function is performed by the CFO. But the most
recent developments tend to situate the management controller outside of any hierarchy and link it
directly to the organization's chief executive officer. This position favors the independence of the
controller and gives it much greater powers of intervention. To carry out its mission, the Controller
relies on all the resources available in the organization, whether technical, financial or human
resources
MCS in the organization
Actions Structure
ORGANISATION
MCS
Pilot
Aims and Objectives
Motivations
Experience
History Values and cultures
Controller's business
The management controller must be versatile. It must be: a specialist (mastering the tools), a
generalist (organizing, coordinating procedures), an operational (managing execution), a
functional (advising decision-makers), a technician (integrating the technical dimension) and
a human being (Manage men and groups).
This business concerns companies in all sectors of activity. In a large company, management
controllers can be specialized (Controller of industrial, commercial, budgetary management)
and functionally attached to a central management cell. In SMEs, the management controller
can perform other functions (accounting, financial, administrative) at the same time.
In general, the Controller shall:
Reconciling the ideal and the possible, if it is important to have a sufficiently precise information system, it is necessary not to multiply to infinity the number of variables
to be taken into account, too much information kills Information.
Define procedures that combine qualities of presentation and clarity. The Controller should bear in mind that these procedures will be used by operational managers who
do not have the same skills as him.
Guaranteeing in part the rationality of the approach followed in making the decisions, failing to be able to master absolutely the rationality of the choices made.
Inform and train those responsible for the management control interest, while providing them with the means to use it effectively. It must ensure that those
responsible follow the established procedures: complete the forms in a timely manner,
circulate the data, take account of coding constraints.
Encourage managers to play the game effectively: are they really involved in forecasting so that goals are realistic? Do they provide reliable information to measure
outcomes? Do they try to identify the causes of the gaps and take appropriate
corrective actions?
Develop an advisory activity, that is to say to give the directors an effective aid to guide their reflection.
Given its particular function, the Controller must possess a certain number of qualities. The
good management controller will of course have to be competent in management, to know the
intricacies of the budget analysis, to be able to control his account plan and the structure of Its
management and general accounting. But the figures are only the formalized translation of a
technical and commercial reality. If the controller is unfamiliar with it, it will handle data
without understanding its true meaning. He must therefore be familiar with the products and
markets, be aware of both the problems of the sellers (general agent brokers, direct offices)
and disaster management. It's not
Because he is called to be the interlocutor of all the centers of responsibility. Multidisciplinary
training is highly desirable for a management controller. In addition to being able to control
the techniques of his function with ease, he must be introduced to all the techniques that can
be used within the company. A strong aptitude for dialogue, training, education and guidance
must leave no room for control in the sense of repression.
The management controller must have a sense of responsibility to provide information that is
accurate, timely and comprehensible and, above all, fresh because the latter will depend on
timely decision-making, especially when information is Impact on the competitive edge of the
company.
The Controller must have an uncompromising ability to synthesize and select the information
so as not to flood those responsible for figures which often run the risk of conflict and
therefore can not resolve a situation Given. Indeed, the management controller must be
animated by the concern not with the quantity of information but, above all, with its quality as
it has just been said. In the end, it would be better to provide approximate information at
frequent and recent intervals than accurate information but with months, if not the quarter of
delay. It is even necessary to anticipate, if possible.
The controller must not identify the auditor but must, on the contrary, be in control of the
situations, analyze and interpret the information, and be responsible for the assimilation of
that information by its recipients, namely, in particular, the The company on the one hand
and; On the other hand, the different managers of the operational centers.
In this section we examine theoretical research and especially the results of empirical studies
that have attempted to analyze the link between management control tools and performance
more generally. Over the past decade, several theoretical and empirical studies have been
carried out on management control and performance
Cappelletti and Khouatra (2010) examined the contribution of a management control system
to small firms (liberal firms). The approach used was to implement a management control
system within 350 notary offices in France over a period of six years. The chosen research
methodology is called "qualitative" because it combines a qualitative and quantitative model.
The authors studied five variables explaining the success of the implantation: the skills of the
provider; The size of the company; The involvement of the manager of the firm; The
management control skills of the manager and the management control skills of the
company's management. The interest in such organizations is justified by the fact that, until
recently, they were not involved in the areas of management control. The results showed that
a management control system can be a vehicle for improving social and economic
performance for small firms. The implementation of an adapted management control system
within companies allows to improve the performance within these structures.
Management control as an internal and external control validation factor
Internal control is a system implemented by the management of a company to enable it to
control the risky operations that must be carried out by the company. For this purpose, its
resources are measured, directed and supervised in order to enable management to achieve its
objectives. It is a fundamental notion of the management of companies that will bring in their
restructuring in depth in the years to come.
There is an increasing number of companies with an internal audit department or an internal
control department. One can wonder about its role and responsibilities. Are internal auditors
responsible for internal control of the company? Very often the leaders of these teams think
so. However, it must be clear that the responsibility for internal control lies with the general
management. In this context, internal audit teams should ensure that internal control
procedures are in place, functioning and delivering the expected results.
In fact all employees of the company are responsible for internal control. Whatever their job
effectively applied. In this context, the management of the company has the responsibility to
put in place sufficient control devices within the framework of the instructions that they give
to the persons placed under their orders.
Here, both internal audit and external audit play an important role. While external audit has
developed significantly, Cappelletti L., Khouatra D. (2009), stated that internal audit has no
theory to guide academic research and practice. In addition, the academic literature on internal
audit is limited. He attributed this to the lack of a theory for the use of internal audit as an
organisational control. Despite its strong acceptance in professional practice, researchers and
practitioners have largely ignored internal audit as an organizational control function. As
such, the lack of research interest has impeded the establishment of a collective theory (or
theories) for the use of internal audit .
To understand the role of MCS in accounting principles Contribution of accounting in
management control system could be discussed from every angle of subject. Traditionally,
and in somehow till now, accounting and finance play a significant role in management
control system by contribution in decision making especially in the field of strategy.
However by emerging new issues like intangible property and knowledge, the centrality of
accounting is not as it was before. It means that intangibles are powerful rival for accounting
and finance in the case of centrality. The role of accounting in MCS highly depends on
structure and in public and governmental sector, the affects of accounting is important but in
privet sector with new approaches to governance and control system, the other elements like
owner ship and leadership has significant impact on control system. In family-led business,
accounting is not important as it is in non-family business and owners play more important
role in establishing and improving MCS. This role could play by powerful individuals in
delegation or agency form of owner.
7.Méthodologie
To carry out this research, we have opted for a methodological approach composed of two
aspects. In order to complement the theoretical aspects and to support them further, we
considered it useful to present a practical case.
8.Framework for empirical research
Data collection is a necessary and fundamental step for the success of any Empirical study. It
is carried out in several ways. In order to achieve our objectives, We chose to conduct a
questionnaire survey. It was administered Organizations in the various sectors of activity that
have implemented MBS.
The survey is a widely used method in research that management. It is a technique favored by
several researchers (Cooper R. 1990). The poll Can be carried out by post or electronic
means, through an individual or collective interview or simply via a telephone interview. In
addition, surveys are inexpensive means of external field validation.
9.Sample selection
The target population in our work concerns SMEs There is no single definition of SMEs. The
criteria used differ according to the legislative or regulatory texts establishing SME
management aid schemes.
Similarly, this definition differs from one country to another because of the non-conformity of
the size of the economy at the international level.
We can then retain a few definitions, each of which refers to one aspect: SMEs refer to small
firms, particularly in relation to their number of employees, so the criterion of the number of
people is certainly one of the most important criteria. And must become a mandatory
criterion. This number must not exceed 300 persons.
. Regarding the choice of the sample, no criterion is decisive. It is a sample of convenience
that does not aim to be generalizable but that simply provides access to available and easily
searchable respondents.
This empirical study covered 41 Tunisian companies belonging to three sectors of activity:
18 companies are part of the industrial sector.
13 companies belong to the commercial sector.
10 enterprises belong to the primary sector.
The test of the initial version of this questionnaire, made with the directors, internal and
external auditors, which allowed us to modify the formulation of some questions deemed
individuals contacted, if necessary, with a member of the executive management (general
manager, sales manager, CFO, etc.). Compared to other modes (postal survey, computer
survey, etc.), the face-to-face survey has several advantages, such as interaction with
respondents and the collection of more detailed and informal information serving Analysis of
the results.
10.Analysis of the results
The analysis of the results obtained highlighted the importance of management control,
internal and external audit practices and the evolution of management control practices.
The empirical results show that ERP systems are fairly well known. 45.66% of the companies
questioned think that ERP is an information technology that becomes necessary to adopt in
any competitive organization and 53.78% of the respondents actually have an ERP system in
their organization. The Internet is the most well known and widely used information and
communication technology in Tunisian enterprises. It emerges from these preliminary results
that Tunisian firms that have adopted an ERP and have tried to satisfy the services provided
for the system, especially with regard to information, its accuracy, accuracy and reliability.
On the other hand, satisfaction levels, when compiled at the level of each LES individually,
reveal that if users can be very satisfied on one criterion, they can be very dissatisfied on
another. If a user is particularly pleased with a given ERP, another regrets having chosen it.
While some ERPs have simply been below expectations, there is in fact no ERP that can be
everything for everyone and the satisfaction is generally rather global with a lot of "yes, but
..." and if the disappointments Are many, the happy surprises can be as much. Roughly
speaking, things have changed in these three years and it seems that Tunisian companies are
on the right path in their integration of the new generations of information technologies. But
the priority remains in the computerization of small and medium-sized units which, wholly
without computer and management systems, may believe that these systems are financially
inaccessible to them. This was true some time ago, but more and more solutions are presently
present that are addressed to virtually all exchanges. Moreover, according to the results of the
study, they are particularly effective in terms of the satisfaction of those who have already
Finally, the results of a cross-chi-square analysis showed the evolution of the calculation
methods in the sense of Johnson in different articles (1972,1975a, 1975b, 1978,1980, 1981
and 1983), and Kaplan (1984). This evolution of the company's management policy inevitably
results in a profound change in the tools of management control and internal and external
control. However, the empirical results show that 56.71% of the companies questioned
integrating the function "control of management" also function internal and external control to
the analysis of budget variances, planning and budget (45.33%). They still combine
management control with an operational function (54.76%). In addition, traditional costing
tools have not evolved: the full cost method with homogeneous sections (34.78%), the direct
costing method (32.63%), the rational imputation method Of the fixed costs (36.87%), the
ABC method and the ABC method controlled by time (45.65%), the target costing method
(23.56%). The budget is the main management tool currently used in Tunisian enterprises
(68.6%) and the majority use traditional budgetary control (51.5%).
Finally, the main tri-simple and tri-cross results show that an evolution of the design, missions
and management control tools has become more necessary than ever. Indeed, the new
relationships between the company and its environment call into question the traditional
approach of management control.
The results obtained show a change in management control in Tunisian companies.
Analysis of the evolution of the design, objectives, tools and information system shows that
the management control system tends to evolve towards a modern management control
system that is much more oriented towards The animation of the economic intelligence of the
company, towards the creation of a spirit of cooperation and innovation. The management
control in the Tunisian companies began to have a Psychosociological and even political
dimension, giving more importance to the motivation of the actors.
Conclusion
Management control may be subject to an internal audit to ensure, for example, that the
processes for obtaining the figures are under control, that the procedures for recording and
processing the data are respected, that the information Are broadcast to the right people.
We can say that the close relationship is mainly between two notions among the three studied
namely: Internal audit Management control And after the research done we have seen that the
who choose leaders to assume it. Officials who unfortunately in most cases are not equipped
to do this job. It has been found as a major conclusion that diagnosis is at the heart of the two
areas of management control and internal audit. These two acts of management control and
internal audit are characterized by the diagnosis of establishing the development strategy,
constructing a policy to establish strategic objectives, implementing actions Optimizing the
consumption of resources, and correcting malfunctions and making exploitation profitable.
This does not mean that we exclude the importance of internal control within the company but
it only shows that the two notions of management control and internal audit are more attached
to each other.
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