In: Accounting
Think to a position that you have held at either your workplace, or volunteer organization.. Compare the following three types of controls: preventative, detective, and corrective. Give two examples of each type of control that you have experienced. Of the three, in your opinion which one do auditors usually focus on more in an audit?
There are three types of internal controls :
Examples of this are :
1) Doing audits is the best example I'd the detective controls. Running an audit detects where the error has occurred. This is the most effective way of detecting the errors.
2) reconciliations is yet another way to detect fraud as it checks that money leaving and account is entering other account. This means one accout is debited then another is credited. This way errors are detected.
1) reporting problem to the management and making required changes against the error. Example if a particular transaction has been intentionally omitted, it should be reported and also should be added in the accounts and make a fresh report with corrections.
2) running training program would help in correcting problem that has occurred. It should be taught and made to learn how to tackle such problems and accordingly employees should now make changes after learning from these programs.
These were the three internal controls along with their example.
In the audit, auditors more focus on detective controls as audit is to recognise the errors or frauds which is being occurred. Audit helps to find those errors and report to the management further.
Therefore for auditing, this detective control is the most important.