Internal control, as defined in accounting and auditing, is a process for assuring achievement of an organisation's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.

Internal control procedures required in business:

 

1. Separation of duties - involves dividing responsibility for bookkeeping, deposits, reporting and auditing.
2. Access controls - controlling access to different parts of an accounting system with passwords, lockouts and electronic access logs can keep unauthorised users out of the system while providing a way to check the usage of the system to identify the source of errors or discrepancies.
3. Physical audits - include hand-counting cash and any physical assets tracked in the accounting system, such as inventory, materials and fixed assets.
4. Documentation - Standard documents used for financial transactions, such as invoices, purchase orders and travel expense reports, can help to maintain consistency in record maintenance.
5. Trial balances – calculating daily or weekly trial balances can provide regular insight into the state of the system, allowing you to discover and investigate discrepancies as early as possible.
6. Reconciliations - Regular reconciliations can ensure that balances in your system agree with balances held by other companies such as banks, suppliers, credit customers. 
7. Approval authority - Requiring specific managers to authorise certain types/value of transactions can add a layer of responsibility to your records by proving that transactions have been seen, analysed and approved by appropriate level of management.

Let us help you make recommendations regarding the implementation of internal controls in your business and help management monitor the effectiveness of the controls in an ever-changing environment.

Assessing and strengthening internal controls

Internal control, as defined in accounting and auditing, is a process for assuring achievement of a company’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.  

Weak internal controls in a business are like an invitation to fraud!

An internal control risk assessment should be undertaken which focuses on determining whether internal controls are working effectively and include an:

1. assessment of the design and operating efficiency of the internal controls in place
2. understanding of the flow of transactions to ensure controls are in place at points of which misstatement could arise.
3. assessment of controls to prevent and detect fraud

  Improving and reviewing internal controls is an on-going process and self-evaluation is important.

Methods of strengthening your internal controls include:

1. Identifying risk areas in your business
2. Ensuring duties are segregated
3. Having adequate physical control of assets
4. Correct errors promptly
5. Develop written policies and procedures
6. Provide adequate training to staff
7. Maintain adequate supporting documentation
8. Maintain adequate approval of documentation and transactions