To have an effective system of internal control, five objectives must be met. The first, and most important, is the safeguard of assets. If the organization fails to secure assets such as cash or inventory, those assets will silently slip away over time. Second, the employees must be encouraged to follow company policy and work towards the company’s goals. This involves setting in place a set of clear policies that provide fair treatment for all. This leads to the third objective, which is promoting operational efficiency. When employees follow company policy, resources are utilized at maximum capacity, which minimizes waste, lowers cost, and raises profits. Fourth, the company must ensure accurate and reliable accounting records, which are essential in measuring the health of the organization. Without doing so, the company is operating in the dark. Lastly, to maintain legitimacy, the organization must comply with legal requirements. Otherwise, it would not be permitted to conduct business and would cease to exist as an entity.
There are also five different aspects involved with the implementation of internal control. It begins with creating a control environment, which starts at the owner and top management level. They should set the example for their employees on how to act ethically within the business and... [continues]
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