The cornerstone of any successful risk management program is effective internal controls. All companies deal with fraud threats, data manipulation, financial misstatement, and cybercrime, but robust internal controls are essential to manage these threats and prevent them from affecting the business.
Having effective and targeted internal controls can protect your company’s assets and intellectual property to prevent costly errors, reduce the risk of fraud, and decrease the chance of non-compliance. However, implementing internal controls is not enough. Internal controls should be continuously evaluated and tested to identify weaknesses and opportunities for improvement.
What Are Internal Controls?
Internal controls are a tool that should be constantly refined to help the company reach its intended objectives. Internal controls are the protocols, procedures, and activities that protect organizations from financial, operational, and strategic risk. Organizations using technology to produce financial reporting need internal controls to guard against cybersecurity threats and to assure compliance with regulations.
The core purposes of internal controls are to:
Identify risks
Mitigate risks, and
Control the distribution and manipulation of information
And internal controls provide reasonable assurance that the following objectives are met:
Protection of assets
Accuracy of financial statements
Compliance with laws and regulations, and
Effectiveness and efficiency of operations
