Importance Of Internal Control In Accounting

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KUDIRAT TAJUDEEN Principles of Accounting Mid Term Exam Review of Chapter 7: INTERNAL CONTROL Introduction Internal control is an important part of any organization’s policies and procedures. It is a designed process put to effect by a company to establish reasonable assurance that the organization’s financial reports are reliable and are in accordance with laws, regulations and policies in line with generally accepted accounting principles (GAAP) and also safeguard the company’s assets from theft, unauthorized used or misuse and ensure the achievement of an organization’s objectives. The need for internal control Principal merchandising transactions has to do with buying and selling, it involves assets such as; cash, account receivables and inventories. These assets are vulnerable to theft and embezzlement. If something is not done to protect these assets, the company may suffer a great loss. Thus, internal control is needed in an organization to eliminate theft and provide reliable financial report. Management’s responsibility for internal control The responsibility of company’s management is to establish a satisfactory internal control system such as all policies and procedures that are needed to ensure that the company’s assets are secured and protected, the reliability of financial reporting, compliance with law and regulations and the effectiveness and efficiency of the company’s operations. The law requires that the chief executive officer, the chief financial

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