Question

Discuss the concept of internal control in detail as per the lecture . ( importance , need , principles , process )

Answer 1

Internal Controls

Internal Control is a procedure or policy developed by the establishments to reduce the risk of loss of assets and safeguard the assets, ensure correctness of records, ensuring adhering to policies, rules, regulations and law.

Importance of Internal Control

It helps to ensure the following,

1. Safeguard assets

2. Promote Accountability

3. Adherence to laws and regulations

4. Reducing the opportunity to commit fraud and reduce errors while recording transactions

5. Reliability in financial statements

6. Effectiveness and efficiency in business functions

Need of Internal Control

1. It helps in the timely completion of audit.

2. It helps in achieving corporate goals and objectives.

3. Its helps review of accounting and internal control systems

4. It helps in checking of operational and financial information.

Principles of Internal control

1. Change of Duties or Segregation of duties

2. IT related technological controls

3. Performance of regular independent review

4. Well-designed Accounting System

5. Division of work

6. Record Maintenance

7. Review of related party responsibility

Process of Internal Control

1. Develop an appropriate control environment which suit to the entity

2. Identifying and assessing the risk

3. Implementing control

4. Information and Communication

5. Monitoring