Utilization of Internal Control Practices of Selected Trading Corporations of the Philippine Stock Exchange: An Assessment

Abstract

The purpose of the study is to determine the relationship of internal control practices to possible market manipulation through the occurrence of erroneous disclosure and other fraudulent information in selected trading corporations of the Philippine Stock Exchange. The study used correlation retrospective research method and purposive sampling in choosing the samples to be involved in the study – that is the suspended corporations of the Philippine Stock Exchange. Involved corporations were categorized by their profile in terms of the industry and nature of business, market share, level of income, and listing period, and then evaluated the effects of internal controls (control environment, risk assessment procedures, control activities, information and communication, and monitoring) in possible market manipulation through occurrence of erroneous disclosures thereafter. The study finds that risk assessment is the most affected internal control factor considering the profile of the involved trading corporations. Since risk assessment is the most affected among internal controls, and under that, the subcomponents Changes in Operating Environment and Corporate Restructuring are both most affected, the researcher recommends to strengthen these two better by properly disclosing the needed disclosures required by the Exchange to avoid severe suspension due to possible projection of erroneous disclosure and other fraudulent information that may cause market manipulation other than the inherent ones as per the Exchange’s rules and regulations. Hence, the study concludes that utilization of corporations’ internal control could affect the projection of the overall image of corporations to its possible market that would either induce or discourage investors.