What are Internal Controls?

Internal controls are systems and procedures designed to ensure a company’s assets are protected, operations run smoothly, and financial data is reliable.

Components of Internal Control

• Control Environment: The company’s attitude and culture about controls.
• Risk Assessment: Identifying risks that threaten objectives.
• Control Activities: Actions to address risks (approvals, authorizations).
• Information and Communication: How information flows and is shared.
• Monitoring: Ongoing checks to ensure controls work.

Evaluating Internal Controls

Auditors test controls to decide how much they can rely on them. Strong controls can reduce the amount of detailed testing needed.

Internal Control in Practice

Strong controls help companies prevent errors and fraud, and auditors use this information to plan their work.