What is an External Control?

An external control is any type of outside influence that impacts the operations of a business. This may result in alterations to an organization’s governance, or its policies and procedures, or in how it deals with business partners.

Examples of External Controls

There are numerous examples of external controls, including the following:

Government regulations. A government could enact a law that prohibits a firm from using discriminatory hiring practices.
- Tax laws. Ensure proper reporting and payment of taxes.
- Labor laws. Regulate wages, working conditions, and employee rights.
- Environmental regulations. Enforce pollution limits and sustainable practices.
External audits. An outside party might impose an audit on a business.
- Independent financial audit. Conducted by external auditors to verify financial statements
- Internal Revenue Service audit. Ensures tax compliance and detects fraud.
Stock market rules. A listing entity may impose rules on public company.
- Stock exchange listing requirements. Ensure transparency for publicly traded companies.
- Board of directors oversight. External board members provide independent governance.
- Shareholder rights. Protects investor interests in decision-making.
Consumer protection agencies. These agencies provide oversight of business practices that may harm consumers.
- Federal Trade Commission. Prevents unfair business practices and protects consumer rights.
- Consumer Product Safety Commission. Regulates product safety standards.
Media scrutiny. The media could run a series of critical news stories about the environmental practices of a business, which may influence whether it continues to use those practices.