Internal controls are a company’s effort to protect its assets from unauthorized use, robbery, embezzlement, and employee theft (Weygandt, Kimmel, & Kieso, 2008). Internal controls improve the reliability and accuracy of the accounting records by reducing mistakes and irregularities whether done purposefully or unintentionally. The principles of internal control are establishing responsibility, using physical, mechanical, and electronic controls, segregation of duties, and independent internal verification (Weygandt, Kimmel, & Kieso, 2008).
The principles of internal control establishes responsibility by assigning one employee to a specific task so a company can easily monitor record keeping in order to reduce errors and minimize abuse (Weygandt, Kimmel, & Kieso, 2008). Physical controls such as safes, vaults, locked storage cabinets, and computer facilities that require pass keys or fingerprint scans limits access and pinpoints responsibility to a small select group people (Weygandt, Kimmel, & Kieso, 2008). Mechanical and electronic controls such as alarms, video surveillance, and employee time clocks, reduces break-ins, deters theft, and prevents unauthorized overtime hours by safeguarding company assets and improving the accuracy and consistency of accounting records (Weygandt, Kimmel, & Kieso, 2008).
Segregate duties by assigning different individuals to related responsibilities in a company. One employee is responsible for the record keeping of a particular asset, and another is responsible for the physical custody of that asset. Segregation of duties provides a dependable starting point for evaluating the work of one employee by reviewing the work of another (Weygandt, Kimmel, & Kieso, 2008). Companies also use independent internal verification to periodically review the data prepared by employees. Independent internal verifications are done