Internal Controls
What Are They?
Broadly, Internal Controls are the methods and procedures used to provide reasonable assurance that the organization’s objective and goals will be met. The main objectives of a system of Internal Controls is to ensure reliability and integrity of information, compliance with policies, procedures, laws and regulations, safeguarding of assets, economical and efficient use of resources.
Principles/Components?
The well-established COSO Internal Control Framework identifies five interrelated components for managing business risks: the control environment, risk assessment, control activities, information and communication and monitoring. More information regarding each component can be found on the Office of Internal Audit Website.
Main Types?
Generally, there are two types of Internal Controls, preventive and detective, and both are essential to an effective system of Internal Controls.
Preventive Controls are: proactive and are designed to deter or stop an unwanted outcome before it happens. Examples of preventive controls are: Policies and Procedures, Passwords, Approvals, Verifications, Access Limitation and Segregation of Duties.
Detective Controls are: designed to uncover errors or irregularities after they occur. Examples of detective controls are: Reconciliations, Performance Review/Analysis (Budget to Actual, Forecasts, Prior Period Review), Inventory Counts, Internal Audits and Surprise Cash Counts.
Who is Responsible?
EVERYONE!!! Yes, everyone plays a part in the University of South Alabama/USA Health systems of Internal Controls! While ultimately management is responsible for ensuring controls are in place, that responsibility is many times delegated to individual areas of operation; therefore, every employee has some responsibility for making our Internal Control system function!
How is my Department Doing?
Now that you know more about Internal Controls, if you’d like to see how your area or department is doing, an Internal Control Self-Assessment can be found on the Office of Internal Audit Website.
