A Study on the Comparison to the Internal Control System between Public and Private Company in Korea
Authors:   Asia-Europe Perspective Association, Yoo In-Chil , Lee Jae-choon 
Published: December 2024

Recently, incidents of corruption frequently occur in private companies as well as public institutions, and they are becoming more deliberated. It’s because the internal control system, autonomously operated by management team, is not operated well in certain organization’s work routine. However, Although Research on the internal control system of public institutions and private enterprises is often conducted from a legal perspective, comparative studies targeting public institutions and private companies from business administration’s perspective are rare. Therefore, purpose of this study is to derive implications through a comparative study of internal control systems of public institutions and private companies, and to present policy plans regarding internal control systems. This study analyzed two public institutions and two private enterprises and focus on four key measures, which are business process control measures such as preventive control function, detection control function, correction control function, and instruction control function.
As a result of this study, public institutions and private enterprise have things in common with their internal control system as follows. First, they have installed fraud reception counters not only online but offline to enable report internal complaints within the organization. However, the level of protection of reporters and acceptance of anonymous reports were different by each company. Second, both certainly has an internal audit function, and the detection control and feedback system are well operated. Third, the code of conduct for executives and employees has been enacted and ethics training is also provided.
Also, there are differences between the internal control system of public institutions and private companies as follows. First, public institutions strengthen audit committee’s independence and well activate introduction of anti-corruption management system. On the other hand, Private companies’ system is much insufficient then public’s, because its’ main goal, profit creation, and owner centered culture.
Second, the introduction of a constant monitoring system using information technology is more active in private companies. Also, they have higher level of professional control personnel and well maintain their personal resources. On the other hand, personnel of public institutions tend to less expertise due to short-term rotational positions.
Based on the results of this study, the following is a suggestion of ways to establish internal control systems for public institutions and private companies in Korea. First, the internal control reform committee should be established to stipulate guidelines for internal control standards.
Second, internal and external experts and internationally certified internal auditors should be assigned to strengthen expertise so that members can reasonably guarantee governance, risk management, and internal control. Third, it is necessary to internalize risk control through ways such as reinforcement of protection and compensation for reporters, revitalization of anonymous reporting environment, and discovery of potential risks. The limitations of this study are as follows. First, due to restrictions on collecting data, to study all public institutions was not possible. Second, in the case of private enterprises, the study was only conducted large companies, not dividing them into large and mid-sized.
Third, although the type of work process control was studied, information system control was not covered in this study. Especially private companies, not only large but medium-sized companies need to build an internal control system and integrate them into their daily work.