Why is it important for management to use a balanced scorecard as part of internal controls?

• A. It replaces the need for information and communication within internal control systems.
• B. It focuses solely on financial outcomes, ignoring non-financial performance indicators.
• C. It provides a comprehensive framework to measure organizational performance across multiple perspectives, supporting effective monitoring and control.
• D. It eliminates the need for risk assessment within the organization.

Answer: (C)

Verified step by step guidance

1. Understand the concept of a balanced scorecard: A balanced scorecard is a strategic management tool that provides a comprehensive framework to measure organizational performance across multiple perspectives, including financial, customer, internal processes, and learning and growth.
2. Recognize the importance of internal controls: Internal controls are processes and systems designed to ensure the reliability of financial reporting, compliance with laws and regulations, and the effectiveness and efficiency of operations.
3. Identify the role of the balanced scorecard in internal controls: The balanced scorecard supports internal controls by providing a structured approach to monitor and evaluate performance across various dimensions, ensuring alignment with organizational goals.
4. Clarify misconceptions: The balanced scorecard does not replace the need for information and communication within internal control systems, nor does it eliminate the need for risk assessment. It complements these elements by offering a broader perspective on performance measurement.
5. Conclude the importance: By integrating financial and non-financial performance indicators, the balanced scorecard helps management make informed decisions, supports effective monitoring and control, and enhances the overall effectiveness of internal control systems.