March 18, 2012
In any business as well as accounting there is a goal to be reached. In order to reach said goal you must take certain steps to obtain that goal. Internal controls are the steps taken to on a daily basis to achieve a particular goal. These steps are what assure that things run efficiently. Each measure is taken to maintain accuracy and reliability in daily operations. Internal controls help to protect the company’s resources against theft, fraud, and errors. Internal control is like checks and balance systems to verify everything is in order.
There are different levels or components of internal control. There are controls that prevent mistakes or errors from occurring. There are controls that are put in place to identify errors or anomalies that may have occurred. There is a control that after a mistake is found corrects the mistake.
There are controls on many different levels depending on the structure of the company. There are controls that maintain order for the environment, possible company risk, and activities of a company, communications, information and monitoring of the company. Each control works in correlations with the other yet all oversea or monitor different aspects of the company. The environment control is basically the tone of the organization that is set by the management of that department. Leaders of company’s lay the foundation of how they want their business to be run and the control environment they set will keep their department in order with structure and discipline. There is always a chance of mistakes happening internally from human error or externally. Risk management identifies such problems or attempts to foresee possible issues and addresses them to help reach the goal.
Objectives must be established before administrators can identify and take necessary steps to manage risks. Operations objectives relate to effectiveness and efficiency of the operations,...