Internal control from a behavioral psychology perspective: An analytical framework and practical implications for SMEs in Vietnam

Abstract

Internal control is a cornerstone of corporate governance; however, in practice, its operation is heavily influenced by human factors. This study examines internal control within accounting processes through the lens of behavioral psychology, highlighting the impact of factors such as motivation, perception, and organizational culture on control effectiveness. The paper proposes a new analytical framework that integrates behavioral elements into traditional internal control models. This includes the development of a Control Readiness Index (CRI) to measure internal control effectiveness from both technical and psychological perspectives. The primary research method is qualitative, utilizing a synthetic analysis of
13 case studies from small and medium-sized enterprises (SMEs) in Vietnam. The results indicate that common limitations in internal control stem from cognitive biases, culture of communication avoidance, and risk rationalization tendencies. However, the findings suggest that if businesses pay adequate attention to the human element, they can significantly enhance internal control performance. Based on these insights, the article recommends specific policies and solutions to implement a behavior-oriented internal control framework within the practical context of Vietnamese SMEs.