Management is responsible for managing the affairs of the company and creates value for

shareholders. If there are not proper internal controls within the organization, there may be many

loopholes which may lead to inefficient management of the company’s resources and thereby

reduction in the value creation for shareholders.

Thus, management should make sure that the internal controls are in proper place and are so

effective that there is no possibility of misuse or otherwise loss of company’s resources.

Management is being elected by the shareholders to manage the helm of affairs of the company

and hence it is their responsibility in turn to perform their duties diligently and therefore ensure

value creation for shareholders.

In a way it is like an employer-employee relationship between the management and the

shareholders. The shareholders are the owners of the company and its resources and hence as

employees of the company, the management should make sure that the resources are intact and

utilized properly and only towards meeting the objectives and goals of the organization. This is

only possible if the internal controls are effective as it would not be possible to keep a check

manually each time. Thus, internal processes and controls are designed in such a way that there

could be no mis-utilization, underutilization or loss of any resources.