Simply defined, internal controls are those procedures you perform everyday to get your job done. For example, completing a form, having it signed and approved, and making a copy for your records, is both a procedure and a control.
A system of controls (or procedures) reduces business risk, which is the probability that certain exposures will lead to loss or adverse business conditions. Good control systems include:
. Individual accountability,
. Independent monitoring,
. Approval and authorization,
. Separation of duties,
. Comprehensive policies and guidelines, and
. Joint custody of assets.
A review or audit of your department will determine whether your internal control system can provide reasonable assurance that:
. Management data is reliable,
. Assets are accounted for and properly safeguarded,
. Operating practices are sound and ensure compliance with policies, laws, and regulations, and
. Resources are used efficiently.