Internal controls are applied in companies to reduce fraud and prevent other financial losses. According to Moore, Palich and Petty (2006), internal control is a system of checks and balances that is significant in protecting a company’s assets through ensuring accuracy and reliability of the company’s financial statements. Further, internal controls assist the company to achieve its business objectives and to ensure compliance with financial and operational requirements. The procedures implemented in internal controls enable adequate safeguarding of a firm’s assets. This plays a crucial role in ensuring the financial information provided by such an organization is reliable and is a true reflection of that organization. Small and medium enterprises use simple physical controls such as ensuring no singe employee has complete control over an entire production process (Puttick and Esch, 2007).
Independent checks by different employees help in tracking of activities and financial information. This promotes accountability and credibility of the financial information. Larger firms use physical controls such as security cameras to protect physical assets and even the firm’s cash and cash equivalents stored in safes. Others use access controls such as passwords to control the opening of doors with the inclusion of surveillance cameras in such systems. Such firms can makes these internal controls more effective by ensuring there is constant changing of the passwords to increase the security level. Computer systems in large and medium organizations are also incorporated with firewall protection to promote safe searches on the internet. These are some of internal controls that are used by most firms to ensure efficient operation in small, medium and large firms.
Reference
Moore, C. W., Palich,, L. E., & Petty, W. (2006). Small Business Management: An
Entrepreneurial Emphasis. (13th ed.). Mason, OH: Thomson/South-Western.
Puttick, G., & Esch, S. D. (2007). The Principles and Practice of Auditing (9th Ed.). Lansdowne
South Africa: Juta.
