BENEFITS OF INTERNAL CONTROLS IN EVERY COMPANY

DEFINATION

Internal Control is a process that has been put by company management or other personnel to ensure the company runs effective and efficiently in order to achieve company objectives. It is the responsibility of the management to setup internal controls and also ensure that they are being followed. Internal Control is also based on the principle of segregation of duties. The Process, policies or practices that a company put in place as an internal control are essential as they protect the integrity of company’s assets, accounting and financial information, they also prevent fraud and promote accountability

TYPES OF INTERNAL CONTROLS

There are two (2) types of internal controls

Detective Controls Management creates internal controls to detect irregularities or error that have occurred, therefore, corrective controls are implemented and designed to correct those errors or irregularities that had occurred.

Preventive Controls Are internal controls created to stop errors and irregularities from occurring in the first place. Corrective controls are implemented and designed to ensure that errors or irregularities will not occur in the future.

EXAMPLES OF DETECTIVE & PREVENTIVE CONTROLS

Preventive Control Examples

Job description
Credit card purchases rather than cash
Authorization through signature
Data entry checks
Physical control over assets to prevent improper use

Detective Controls Examples

Observation of payroll distribution
Accounts review & Reconciliation
Financial Statements & Management Reports
Periodic physical inventory counts
Transaction edits & passwords

BENEFITS OF INTERNAL CONTROLS

They Create Process

They create procedures or protocol so that employees are not left guessing how to perform a particular task or which procedure they should follow.

Improves Process Performance

Once the process has being set, a continuous assessment or monitoring is required to help management make necessary decision whether the process is working, or it needs additional attention. Once the process improves, also the accuracy of financial information/ reports improves, and management may rely on such information to make business judgment or decision.

Improves Operational Efficiency

Internal Controls helps to removes duplicate steps or unnecessary steps in the process. It Ensures segregation of duties Segregation of duties to avoid conflict of interest and reduce chances of financial mismanagement.

Reduce Business Risk

Internal Control limit company’s losses due to mishandled of funds or by employee, or management through reconciliation of bank statements and internal audits.

Organizes Information

Internal control protects company and client interest through creating a system to file and record information and implementing restriction to such information through passwords.

It Provides Timely Financial Statements

Timely financial statements assist management in decision making and protect stakeholders and company reputation. Regular financial statements assist to identify and correct small errors before big problems occurs while building trust and providing transparency.

WHAT WE DO

Engaging our internal audit department will add value and improve company’s operations through identifying risks that will affect organization to achieve its goals, making sure that the company management know about these risks and recommend improvement to company internal controls to reduce risks.

Our internal controls system services will save company money and protect company reputation by identifying inefficiencies, employee theft, wasteful spending, fraud and cases of non-compliance with laws or regulations Our internal control system will keep an eye on company climate and perform a variety of activities not limited to the following.