Final answer:
Management is primarily responsible for establishing a viable internal control system, crucial for accurate financial reporting, operational efficiency, and legal compliance. The board of directors and external auditors play oversight roles but do not replace the responsibility of management, as evident in corporate governance cases like Lehman Brothers.
Step-by-step explanation:
Establishing a viable internal control system is primarily the responsibility of management. Management has the fundamental role of designing, implementing, and maintaining the internal control system to ensure accurate and reliable financial reporting, operational efficiency, and compliance with laws and regulations. The importance of internal controls is highlighted by the role of various entities in corporate governance.
While the board of directors, elected by the shareholders, is responsible for oversight, and external auditors are hired to review financial records, these are forms of oversight and do not diminish the primary responsibility of management. In cases such as Lehman Brothers, failures in corporate governance highlight the critical nature of accurate and transparent reporting provided by management. Additionally, the culture within bureaucracies can often make it challenging for employees to report misconduct, underscoring the importance of strong internal controls established by management.