Major internal control systems at the Malta Stock Exchange : an evaluation

Abstract

Purpose: Undeniably, a sound internal control system is fundamental for the successful achievement of an entity’s objectives and to reduce the possibility of fraud, human error and other irregularities. The primary aim of this study is to assess the operating effectiveness of the implemented internal controls at the Malta Stock Exchange by analysing the control environment and the existing internal control systems within the main areas, namely, Information Technology, Procurement, Human Resources and the Central Securities Depository. Recommendations on improving the internal control systems within the selected areas are also elicited. Design: In order to achieve the objectives of this research study, nineteen semi-structured interviews were conducted with personnel who have diverse experience and insight at the Malta Stock Exchange. Findings: The findings indicate that the Malta Stock Exchange strives to maintain sound internal controls to ensure reliability and transparency through its operations. Indeed, a number of strong control mechanisms are in place, including authorisations, documentation of policies, reconciliations, safeguards against cyber-security risks, and compliance to legislations. However, although internal controls are effective and strong within specific areas, some weaknesses were also identified. Conclusion: This study concludes that while the entity’s internal controls are appropriate and sufficient within certain areas, there is still room for improvement, particularly with regards to segregation of duties, the revision of internal control policies following the emergence of COVID-19 and the appointment of an internal auditor. Value: Various actions are recommended throughout this study to address the identified weaknesses. The adoption of such measures should lead to stronger internal control systems, thus ensuring that risks are mitigated in the most efficient and effective manner.