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.
Principles Of Internal Control
Basic Principles of Internal Control In order to make internal control effective, the following two basic principles should be kept in mind:
- Accounting of Assets: The work physically utilising any asset should be separated from the work of accounting for the same
- Division of Work: The division of work between employees should be such that work done by one is automatically checked by another, i.e., the result of the work done by one should match the result of work done by another.
Hence internal control is a system through which the functioning of a business organisation can be made more controlled, efficient and useful.