Internal Control – The system of control of all aspects of the business and its transactions is known as internal control. Normally, internal control implies controlling the internal work of the business in such a manner that profits are maximised and the possibility of manipulation, frauds, forgery etc. are minimised. The system controls each aspect of the business in a planned manner and through this system all activities of the business, whether economic or non-economic, are controlled. Apart from control relating to research, personnel and administration all other controls relating to the accounts are included in internal control.
Internal control does not mean only internal check and internal audit but the whole system of control, financial and otherwise established by the management in order to carry on the business of the company in an orderly manner, safeguard its assets and secure as per as possible the accuracy and reliability of its records.
Hence, whatever be the kind of control, whether economic or related to the management of the concern it is included in internal control. The word internal control is used in the wider sense and includes all other controls such as internal audit, internal check etc
Objectives of Internal Control
- Providing for the safety of the assets of the business by comparing the actual assets with those being shown in the books of accounts from time to time, and ensuring that only persons duly authorised by the management have access to the assets.
- Examining the accuracy of the accounts and ensuring that transactions are being recorded correctly.
- Establishing responsibility centres and establishing the responsibility in relation to every activity.
- Comparing the standards set by Internal Control with the actual activities and establishing and removing the deviations thereirn.
- Ensuring compliance with the policies of the management and ensuring that transaction are being entered into in accordance with the methods prescribed by the management.
- Increasing the efficiency of work, by increasing the efficiency of material, labour, plant and capital and improving the running of the business.