Knowra Internal control Internal control Internal control is a system of policies and procedures designed to support reliable reporting, lawful operations, and protection of assets. It combines organizational responsibilities, risk responses, and ongoing checks.
Internal Control—Integrated Framework : A framework from the Committee of Sponsoring Organizations of the Treadway Commission for designing and evaluating internal control. It organizes internal control into five connected components and provides a widely used design standard.
Segregation of duties : An arrangement that divides authorization, custody, recordkeeping, and review among different people. Dividing responsibilities reduces the chance that one person can both commit and conceal an error or fraud.
Financial reporting : The preparation and communication of financial information about an organization to internal and external users. Reliable financial statements are one of the central outcomes internal controls are designed to support.
External audit : An independent examination of an organization’s financial statements and, where required, related controls. Management operates internal controls; an external auditor evaluates evidence and reports an independent conclusion.
Control environment : The organizational structures, values, and responsibilities that shape how people carry out control duties. Leadership and accountability establish the conditions under which the other controls operate.
Authorization : Formal approval that a transaction or action is permitted by someone with delegated authority. Approval limits ensure transactions comply with established policies and delegated responsibilities.
Sarbanes–Oxley Act : A United States law that established corporate governance and financial-reporting requirements for public companies. Its Section 404 requires assessments of internal control over financial reporting at many public companies.
Internal audit : An independent, objective assurance and advisory activity that evaluates governance, risk management, and controls. Internal auditors assess and advise on controls but do not replace management’s responsibility for them.
Risk assessment : The process of identifying and analyzing risks that could prevent an organization from achieving its objectives. Controls are selected in response to risks that threaten reporting, compliance, or operations.
Reconciliation : A comparison of records from different sources to identify and resolve discrepancies. Reconciliations reveal recording errors and unexplained differences in assets or accounts.
Show all 23