Internal controls refer to the structures, processes, practices, reports, measurements, and systems that are implemented within an organization to support the implementation of its strategy and ensure compliance with laws, regulations, and internal policies. Internal controls serve a variety of important functions, including helping to protect the organization’s assets, promoting efficiency and effectiveness, and ensuring the integrity of financial and operational information. Internal controls can take many forms, including policies and procedures, segregation of duties, physical controls, and monitoring and reporting systems. Effectively implementing and maintaining internal controls is an important aspect of good governance, as it helps to ensure that an organization is operating in a responsible and transparent manner and is in compliance with relevant laws and regulations. The following are common types of internal controls.
Financial controls such as adopting an accounting standard and segregation of duties.
Controls related to IT operations and information security. For example, a process of approvals for adding user permissions to a system.
Controlling change to assets such as software. For example, a change control board.
Control of projects using project management, risk management and project governance processes.
The process of identifying and controlling risk such as a know your customer process for reducing credit risk.
Controls that are directly related to compliance such as a process of disclosing executive compensation to external stakeholders.
Safety controls such as a preflight checklist for pilots.
Human Resources Controls
Controls related to employee performance and organizational culture. For example, a process of employee performance reviews and disciplinary policies.
Controls related to an organization’s core business processes such as a process of reporting key metrics to senior management.
The testing of products and services to ensure conformance to specifications and policy.