What Are Internal Controls?
One text book definition of the term Internal Controls, is as follows: Internal control comprises the plan of organization and all of the coordinate methods adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies. There are two types of internal controls: Preventative Controls: that are designed to discourage errors or irregularities from occurring (ie., processing vouchers only after signatures have been obtained from appropriate personnel), and Detective Controls: that are designed to find errors or irregularities after they have occurred (ie., reviewing departmental phone bills for personal calls). Who is responsible for internal controls? Everyone should play a part in an organisation’s internal control system. Ultimately, it is management's responsibility to ensure that controls are in place. That responsibility is delegated to each area of operation. Consequently, every employee has some responsibility for making this internal control system function. Therefore, all employees need to be aware of the concept and purpose of internal controls.
