Importance Of Internal Control

OBJECTIVE

A successful company or organization needs to ensure that their internal control environment is managed and controlled in a sound and practical manner.

An organization control environment is mainly influenced by management attitude regarding the importance on internal control.The presence of smooth internal control environment is necessary for well achieving the business objectives.According to O’Leary et al (2006) an adequate system of internal control is considered as critical to good corporate governance.

Organization need effective controls in operating performance directions and increase revenues.Internal controls also helps business from operating losses resulting from noncompliance with law and regulations.

• The Monitoring and Reviewing of internal control system should be regularly reviewed by management. By performing a periodic assessment, management assures that internal control activities have not become outdated or lost due to costs or other factors.

Internal Control Activities and Best Practices

Internal control activities are the policies and procedures as well as the daily activities that occur within an internal control system. A good internal control system should include the control activities listed below.

1. Preventive: Preventive control activities aim to deter the instance of errors or fraud. Preventive activities include thorough documentation and authorization practices. Preventive control activities prevent unwanted "activities" from happening, thus require well thought out processes and risk identification.

2. Detective: Detective control activities identify undesirable "occurrences" after the fact. The most obvious detective control activity is

Other Internal Control Best Practices

With a good internal control system in place, other considerations to keep in mind include:

• Regularly communicate updates and reminders of policies and procedures to staff through emails, staff meetings and other communication methods.

• Continually assess risks and the level of internal control required to protect business assets and records related to those risks. Document the process for review, including when it will take place. In control environment the human resources section is in charge of internal structure includes personnel manuals staff appraisal, promotion and compensation in accordance with corporate plan.

• Unauthorized access,loss or damage of assets and records should be kept secure at all times,For ongoing operations the security of assets and records is essential,accuracy of information, privacy of personal information included in some records.

Distribution of Duties

One particular person has the sole control of transaction, no one should be able to initiate,record or authorize a transaction. The level of risk associated with a transaction should come into play when determining the best method for separating duties.Duties may be separated by departments or by individual within a department .Assess the potential for mistakes or fake. If the separation of duties is not sufficient to eliminate or adequately reduce the risk of discovering errors, the level of review of management should be increased over the