An Introduction to Internal Controls

Implementing internal controls into your accounting cycle can help mitigate risks and promote the reliability and accuracy of accounting data and financial statements. It's important to review and update internal controls periodically to ensure their continued effectiveness. Here are some key internal controls that can help ensure the accuracy, completeness, and integrity of accounting data and financial statements.

Segregation of duties

Separating responsibilities for different accounting functions can help prevent fraud and errors. For example, the person who handles accounts receivable should not be the same person who handles cash receipts.

Authorization controls

Ensuring that transactions are authorized by the appropriate individuals before they are recorded can help prevent unauthorized transactions or errors. Reviewing budget to actuals on a regular basis is another valuable safeguard.

Physical controls

Securing assets and accounting records through measures such as locks, access controls, and video surveillance can help prevent theft and unauthorized access.

Reconciliation and review

Periodic reconciliation and review of accounts, transactions, and financial statements by independent parties can help detect errors and fraud.

Documentation and record-keeping

Proper documentation and record-keeping can help ensure that all transactions are properly recorded and can provide evidence of the completeness and accuracy of accounting data.

Training and awareness

Providing training and raising awareness about fraud and accounting errors can help prevent them from occurring and can encourage employees to report suspicious activity.