Impact of Internal Control for Financial Reporting on Company Performance: Evidence from India

Ing. Sumaila Khan

Master's thesis

Abstract:

This thesis examines IC and corporate governance in improving the quality of financial reporting and performance concerning Tata Motors Limited, an Indian automotive company. As business environments get much more complicated and legal requirements become much stricter and more numerous, internal controls should act as an effective tool to maintain organizational accountability and manage business processes effectively. The study uses comparative analysis to compare the state of the internal controls in Tata Motors before and after improvement initiated in FY 2019 on different types of assets, such as fixed tangible assets, intangible assets, inventories, and current assets. Based on the COSO Framework, this study examines the five components of internal controls at Tata Motors: control environment, risk assessment, control activities, information and communication, and monitoring of reporting cycles. It also builds on an understanding of how improved internal control efficacy resulted in better financial reporting, lower operational risks, and higher stakeholder trust. According to the report, the organization achieved a greater level of alignment with corporate governance principles, as well as improved resource usage and operational performance, following implementation. This research also provides recommendations to internal control system proponents, policymakers, and organizational decision-makers who wish to improve internal controls. The suggestions for further enhancement of proposed models and guidelines for future research are also provided to facilitate the effective functioning of business entities in uncertain and competitive environments.

Abstract:

This thesis examines IC and corporate governance in improving the quality of financial reporting and performance concerning Tata Motors Limited, an Indian automotive company. As business environments get much more complicated and legal requirements become much stricter and more numerous, internal controls should act as an effective tool to maintain organizational accountability and manage business processes effectively. The study uses comparative analysis to compare the state of the internal controls in Tata Motors before and after improvement initiated in FY 2019 on different types of assets, such as fixed tangible assets, intangible assets, inventories, and current assets. Based on the COSO Framework, this study examines the five components of internal controls at Tata Motors: control environment, risk assessment, control activities, information and communication, and monitoring of reporting cycles. It also builds on an understanding of how improved internal control efficacy resulted in better financial reporting, lower operational risks, and higher stakeholder trust. According to the report, the organization achieved a greater level of alignment with corporate governance principles, as well as improved resource usage and operational performance, following implementation. This research also provides recommendations to internal control system proponents, policymakers, and organizational decision-makers who wish to improve internal controls. The suggestions for further enhancement of proposed models and guidelines for future research are also provided to facilitate the effective functioning of business entities in uncertain and competitive environments.

Keywords

IC, Internal Controls COSO, Committee of Sponsoring Organizations of the Treadway Commission ERM, Enterprise Risk Management GAAP, Generally Accepted Accounting Principles IFRS, International Financial Reporting Standards SOX, Sarbanes-Oxley Act CEO, Chief Executive Officer CFO, Chief Financial Officer NBFC, Non-Banking Financial Company CIC, Core Investment Company SOP, Standard Operating Procedure KPI, Key Performance Indicator IT, Information Technology PLC, Public Limited Company TMFL, Tata Motors Finance Limited TMFSL, Tata Motors Finance Solutions Limited TMFHL, TMF Holdings Limited TML, Tata Motors Limited AML, Anti-Money Laundering RBI, Reserve Bank of India

Language used: English

Date on which the thesis was submitted / produced: 3. 1. 2025

Thesis defence

• Date of defence: 28. 1. 2025
• Supervisor: Ing. Oleksandra Lemeshko
• Reader: Ing. Bc. Jana Hvozdenská, Ph.D.

Masaryk University

Faculty of Economics and Administration

Master programme / field:
Finance / Finance