INTERNAL CONTROLS

Introduction

Internal Controls are to be an integral part of any organization’s financial and business policies and procedures. The objectives of internal controls are:

▪ Protecting resources against waste, fraud, and inefficiency; ▪ Ensuring accuracy and reliability in accounting and operating data; ▪ Securing compliance with the policies of the organization; ▪ Ensuring compliance with applicable laws and regulations; ▪ Evaluating the level of performance in all organizational units of the organization; ▪ Providing management with reasonable assurance that leave and payroll transactions are authorized, valid, complete and accurate; ▪ Safeguarding leave and payroll documents from theft, loss and destruction; and ▪ Internal controls are simply good business practices.

The benefits of good internal controls are:

▪ Prevents errors and irregularities from occurring. If errors or irregularities do occur, they will be detected in a timely manner. ▪ Ensures that issues arising from reporting errors are kept to a minimum and quickly resolved. ▪ Protects employees: o By clearly outlining tasks and responsibilities; o By providing checks and balances; and, o From being accused of misappropriations, errors or irregularities.

What are Internal Controls?

Internal controls are the practices performed by departments to provide management with reasonable assurance that assets are safeguarded and transactions are authorized, valid, complete and accurate.

Internal control systems operate at different levels of effectiveness. Determining whether a particular internal control system is effective is a judgment resulting from an assessment of whether the five components – Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring – are present and functioning.