2.3 Types Of Internal Control Essay

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2.3 Types of Internal Control System
Galloway (1994) puts forward that controls can be either preventative or detective. Preventative controls try to deter or avoid undesirable events from happening. Examples or preventative controls include: separation of duties, proper authorization, adequate documentation, passwords and physical control over assets and even traffic signs.
According to Galloway (1994), detective controls try to identify errors or irregularities which have already happened. Reviews, analyses, reconciliations, periodic physical inventories, audits and security cameras are samples of detective controls. Both categories of controls are vital to an effective internal control system. From a quality viewpoint, preventative controls …show more content…

Reviews of Performance (Detective): Management compares information about existing performance to financial plan, predictions, previous periods, or other yardsticks to measure the level to which goals and objectives are being attained and to detect unexpected outcomes or uncommon situations that necessitate follow-up.
3. Security of Resources (Preventive and Detective): Access to tools, stocks, securities, cash and other resources is limited; assets are from time to time control to amounts shown on control records.
4. Segregation of Duties (Preventive): Duties are divided between different people to lessen the risk of error or wrong action. Usually, duties for approving transactions, recording transactions (accounting), and handling the related asset (custody) are divided.
- A study showed that auditors make judgments based on their assessment of internal control strengths and weaknesses. Auditing practice and research have recognized that the segregation of duties is an important aspect in this evaluation procedure. However, research on how the segregation of duties affects auditors' judgments has been limited because of the wide variety of duty segregation patterns possible in accounting systems.
(July 1, 1994, Journal of Accounting, Auditing and Finance)
2.3.1 Clear Lines of Authority and

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