The relationship between the internal control system and the risk of financial failure: An application example

Activities of enterprises has been complex as the result of rapid growth and development since 1940's. Transactions at business operatins being detailed increased the need to reliable and accurate information. The aim of accessing reliable and accurate information makes the concept of control more important. Control activities at enterprises are being performed by company managers and staff. Smooth and productive ongoing of control activities of enterprises is the most effective tool to access accurate and reliable information. In the study, questionnaire was conducted to measure efficiency and productivity of internal control system of enterprises. Efficiency of internal control systems were determined according to the responses. Aim of the study is determining the effect of internal control system efficiency of BIST (Borsa Istanbul) listed manufacturing enterprises on their financial failure. Sample of study consists of 101 manufacturing companies listed at Borsa Istanbul between years 2000 and 2022. 2022 second quarter financials were considered as base year to determine enterprises financially failured or not. Financial statements of companies were accessed via Borsa Istanbul and PDP (Paublic Disclosure Platform). Financial failure of enterprises were determined by financial ratios calculated from financial statements. As the result of the study, internal control efficiency and financial failure of enterprises were analyzed. Altman Z Score model were exercised to determine financial risk statement of enterprises. Within the scope of the study there are six hypothesis to measure relationship between internal control and financial failure. Correlation and variance analysis were performed to determine relationship among hypothesis'. Logistic regression and clustering methods were used to analyze datas at the study.