Which of the following would decrease or be reduced if an organization establishes and implements excessive internal controls?

Excessive internal controls, often referred to as "red tape," introduce additional, often unnecessary, steps into business processes. These can include multiple layers of approval, redundant checks, and extensive documentation requirements. While intended to mitigate risk, an overabundance of controls consumes employee time and effort that could otherwise be directed toward core, value-creating responsibilities. This diversion of resources and the slowing of processes directly lead to a reduction in the amount of productive work an employee can accomplish in a given period, thus decreasing staff productivity. The cost of these excessive controls in terms of lost efficiency can outweigh their risk mitigation benefits.

A. Production cycle time: Excessive controls, such as requiring numerous approvals or inspections, would add steps to a process, thereby increasing, not decreasing, the production cycle time.
B. Activities that add no value: By definition, excessive controls are often activities that do not add value from a customer's perspective; therefore, they would increase, not decrease, such activities.
D. Complexity of operations: Implementing more controls, rules, and procedures inherently adds layers to a process, which increases, rather than decreases, the complexity of operations.

1. The Institute of Internal Auditors (IIA), International Professional Practices Framework (IPPF), Standard 2130 – Control. The guidance for this standard emphasizes that internal auditors should evaluate whether controls are designed adequately. Adequacy includes a consideration of cost versus benefit. Excessive controls represent a situation where the costs (including reduced efficiency and productivity) exceed the benefits, indicating an inadequate control design.

2. Committee of Sponsoring Organizations of the Treadway Commission (COSO), Internal Control – Integrated Framework (2013), Executive Summary, Page 6. The framework states, "Management must also consider the costs and benefits of establishing controls. There is a need to recognize that no system of internal control can provide absolute assurance... An effective system of internal control requires the exercise of judgment in designing, implementing, and conducting internal control and in assessing its effectiveness." Excessive controls are a failure of this judgment, imposing costs (like lost productivity) that are not justified.

3. Bozeman, B., & Feeney, M. K. (2011). Rules and Red Tape: A Prism of Public Administration Theory and Research. M.E. Sharpe. Chapter 2, "A Theory of Red Tape," discusses how excessive rules and procedures (a form of excessive control) lead to organizational pathology, including goal displacement and reduced operational efficiency and employee morale, which are components of decreased productivity.