Internal Controls System
THE INTERNAL CONTROL SYSTEM
The internal control system includes all the strategies, policies and procedures adopted or instituted by the management of an entity to assist in their objective achieving as far as practicable, the orderly and efficient conduct of the business and includes adherence and compliance to management policies and applicable laws and regulations; the safeguarding of assets; the prevention and detection of fraud and error, the accuracy, reliability and completeness of the accounting records; the timely preparation of reliable financial information; and the evaluation of the operating performance and efficiency of the organization.
OBJECTIVES OF INTERNAL CONTROLS
To provide reasonable assurance to management and external users/auditors that:
I) Safeguarding of assets- Assets are safeguarded and used for business purpose. Internal control can safeguard assets by preventing theft, fraud, misuse or misplacement. One of the most serious breaches of internal control is employee fraud. Employee fraud is the intentional act of deceiving an employer for personal gain. Such deception may range from purposely overstating expenses on a travel expense report in order to receive higher reimbursement embezzling millions of dollars through complex schemes.
II) Business information is reliable and accurate- Authorizing, recording and safeguarding are related to establishing the system of accountability and are aimed at the prevention of errors and irregularities. Reconciliation and valuation are aimed at detecting errors and irregularities. Prevention and detection of errors and irregularities provides reasonable assurance to managers and external auditors that accounting records are properly maintained and financial reports or information are reliably and accurately produced for the business and publication. Accurate business information is necessary for operating a business successfully. The safeguarding of assets and accurate information often go
The internal control system includes all the strategies, policies and procedures adopted or instituted by the management of an entity to assist in their objective achieving as far as practicable, the orderly and efficient conduct of the business and includes adherence and compliance to management policies and applicable laws and regulations; the safeguarding of assets; the prevention and detection of fraud and error, the accuracy, reliability and completeness of the accounting records; the timely preparation of reliable financial information; and the evaluation of the operating performance and efficiency of the organization.
OBJECTIVES OF INTERNAL CONTROLS
To provide reasonable assurance to management and external users/auditors that:
I) Safeguarding of assets- Assets are safeguarded and used for business purpose. Internal control can safeguard assets by preventing theft, fraud, misuse or misplacement. One of the most serious breaches of internal control is employee fraud. Employee fraud is the intentional act of deceiving an employer for personal gain. Such deception may range from purposely overstating expenses on a travel expense report in order to receive higher reimbursement embezzling millions of dollars through complex schemes.
II) Business information is reliable and accurate- Authorizing, recording and safeguarding are related to establishing the system of accountability and are aimed at the prevention of errors and irregularities. Reconciliation and valuation are aimed at detecting errors and irregularities. Prevention and detection of errors and irregularities provides reasonable assurance to managers and external auditors that accounting records are properly maintained and financial reports or information are reliably and accurately produced for the business and publication. Accurate business information is necessary for operating a business successfully. The safeguarding of assets and accurate information often go