Response to the following problem:
San Marino Foreign Cars prospered during the recent economic expansion. Business was so good that the company used very few internal controls. A recent decline in automobile sales caused San Marino to experience a cash shortage. Mike Key, the company owner, is looking for ways to save money.
As a consultant for San Marino, write a memo to convince Key of the company's need for a system of internal control. Be specific in explaining how an internal control system could save the company money.
Include the definition of internal control, and briefly discuss the characteristics of an effective internal control system, beginning with competent, reliable, and ethical personnel.