Good Research Paper On Justification For An Internal Control
Internal control means a system where the organization assigns the tasks of overlooking the various functions to different people in the system. Basically internal control consists of segregation of duties among people so that no one person completes all the tasks, it also helps avoid any frauds and prevents red flags. Internal control ensures that things are in place when outside auditing takes place. In any organization or any department, internal control plays a huge role. It acts on any red flags that may come up and also reduces the chances of a fraud. There is no guarantee that intern controls will prevent frauds but it has been notices that the chances of the same are reduced to a minimum.
Insurance as well as portfolio approaches are in place and they do provide enough control as well as assurance that the controls are active and the approaches are working well. But internal control is the need of the hour, what it provides is a detailed responsibility of each employee towards the company and also ensures that the work done by one person is overlooked by another. Hence the chances of anything going wrong are minimum. Irrespective of the organization being a computerized system or not, internal control can be set up and developed. It grows over the years and ensures that the system operates as per the set standards of auditing. It also ensures integrity of management and efficiency of the employees. A good internal control consists of communication among the executives and leadership by the management. Effective internal control means good communication and integrity which provides the employees as well as executives to work efficiently in the organization and perform better. It enables segregation of duties, as explained earlier, it means different personnel are assigned different tasks and hence no one person is capable of completing one task all by himself. It ensures that a strict watch is kept on the personnel by his colleagues and safeguards in areas like inventory, cash and banking.
In a huge organization, maintenance of records is highly necessary and internal controls provide a good medium to record and preserve the records. A thorough system is defined which shows how the accounting and maintenance of records will be done. Hence, it is clear for all the employees and how the organization functions. Risk assessment is possible through internal control and it reduces the chances of risk faced by a firm. Risk assessment is necessary as it provides enough awareness and understanding about the probable risks and a way to eradicate them.
Hence, even though the controls are in place, an internal control system will provide efficiency, safety and effectiveness to the system. It will increase managerial control and reduce the risks faced by the company. The organization maybe functioning perfectly right now but an internal control will only add to the benefits and generate a system where risks are reduced, frauds are eliminated and efficiency is increased. The effectiveness of controls and efficiency of the personnel will be high. There are more benefits than costs in the implementation of an internal control system, it may take some time to establish and implement all the functions and divide the tasks among each personnel but once the system is effectively set up, it functions in a good manner. Hence, as a financial controller, I would suggest the implementation of an internal control system in the organization. It will ensure increased efficiency, efficient reporting and effective management. The roles should be segregated and appropriate communication as well as leadership should be developed which ensures the success of internal controls.
Internal Controls. (n.d.). Retrieved from University of Washington: http://f2.washington.edu/fm/fa/internal-controls
James, K. (n.d.). Five Common Features of an Internal Control System of Business. Retrieved from Houston Chronicle: http://smallbusiness.chron.com/five-common-features-internal-control-system-business-430.html