Essay about Internal Controls

Submitted By Beenlouis
Words: 1242
Pages: 5

We would think it utterly ridiculous if there are an organization or group of people who set out upon a project and aimed to fail. In fact most groups of people set out to succeed in what they do. That said, we are also aware that only a few actually reach their goals of success. The question at the end of the day is, what sets these groups apart? What allows them to thrive and grow? And what are the means by which resources are allocated, measured and monitored? These systems that are in play and make all of the difference are often referred to as “Internal Controls.” For this paper I will be defining exactly what internal controls are, explaining their purpose and then looking at personal experiences in which internal controls were utilized effectively and when they were improperly implemented.
Internal controls are established systems or procedures created to help attain the objectives of an organization's mission. Effective internal controls assure the implementation of policies, avoidance of fraud and most of all the promotion of efficiency (University of Washington Finance & Facilities). Most internal controls can be classified into two groups: Detective and Preventative. Detective controls flag questionable incidents after the fact. One of the most obvious examples of detective control systems is the accounting practice of reconciliation in which one goes back to look at a previous time period in order to detect errors. The second group, Preventive controls, goal is to deter those unwanted incidents from occurring in the first place. This is often done through documentation, communication and authority flows (University of Washington Finance & Facilities).
It is commonly accepted that the measures an organization puts in place are vital to protect one's financial and management data. Several common purposes of establishing internal controls for a organizations exists; each with a control measure and goal. By establishing protocols and procedures that staff, or consultants, must follow, organizations can create a more efficient work environment. These established protocols often help to bring order and cohesiveness to organizations; this is because everyone knows what is expected as it is clearly outlined in the internal controls. Internal controls such as employee training can help organizations reduce errors. By training employees on an organization's specific process or procedures, then updating them when new ones are implemented, employees would be less likely to make mistakes.
Organization is an important part of most Internal controls. Properly organized data can increase an organization's productivity by allowing people to better prepare when documents are needed for a new job or if informations is needed in a review or audit. These internal controls might include giving employees separate logins to access information and data, or creating a system for filing client data and financial documents. The organization internal control applies to both online or offline information.
Unfortunately, fraud and theft is all to prevalent in organizations. By establishing internal controls, organizations can help prevent or reduce fraud and theft. These internal controls often include, but are not limited to, activities such as internal auditing, regular reviews and reconciling bank statements. Each of these can uncover whether an organizations money and resources are being misappropriated. The separation of duties can be a type of internal control. The clear separation of duties not only can assist with efficiency but can be a method of ensuring that there's a system of “checks and balances.” For example, an organizations internal controls might separate the task of managing accounts receivable and accounts payable between two people in order to reduce the possibility of fraud and theft. These types of internal controls, or checks and balances, can be ones created specifically by the government. One such example…