Question

What type of internal control should the organization have in place

Answer 1

Internal controls are the policies and procedures that a business puts into place in order to facilitate and support the achievement of business objectives. Any system of Internal Control is based on a consideration of significant risks in operations, compliance & financial reporting.

Such Objectives may include:

- protect its assets,

- ensure its accounting data is correct,

- maximize the efficiency of its operation

- promote an atmosphere of compliance among its employees.

There are three main types of internal controls: detective, preventative and corrective.

1. Detective internal controls - Designed to find errors after they have occurred & to assure their prompt correction. They serve as part of a checks-and-balances system and to determine how efficient policies are.   

2. Preventative internal Controls - Designed to keep errors or irregularities from occurring in the first place.

3. Corrective internal Controls - Designed to correct errors or risks and prevent the recurrence of further errors.

Achievement of business objectives is the main reason for placing Internal controls. Therefore, whatever controls are placed in Internal Control System shall be in accordance with the objectives of the Organisation.