Internal Control is a process within an organization designed to provide reasonable assurance: • That information is reliable, accurate, and timely.
• Of compliance with policies, plans, procedures, laws, regulations, and contracts. • That assets (including people) are safeguarded.
• Of the most economical and efficient use of resources. • That overall established objectives and goals are met. Internal controls are intended to prevent errors or irregularities, identify problems, and ensure that corrective action is taken.
Internal Control Pyramid
Control activities. Control activities are the specific policies and procedures management uses to achieve its objectives. The most important control activities involve segregation of duties, proper authorization of transactions and activities, adequate documents and records, physical control over assets and records, and independent checks on performance. A short description of each of these control activities appears below. • Segregation of duties requires that different individuals be assigned responsibility for different elements of related activities, particularly those involving authorization, custody, or recordkeeping. For example, the same person who is responsible for an asset's recordkeeping should not be respon sible for physical control of that asset Having different indi viduals perform these functions creates a system of checks and balances. • Proper authorization of transactions and...