Internal controls are put into place so an organization’s activities, policies and plans are efficiently integrated to best achieve business goals. It is important to keep a check on and observe the activities of all the departments and all of their employees.
Advantages of Internal Control
Application of internal control provides the following benefits to the various parties:
- Internal control helps to protect the assets of the business from misuse, theft, accident, etc.
- It helps to implement management policies to attain corporate goals. The internal auditor will be able to point out any weaknesses of the organization in the operations or internal controls of the company.
- It prevents any financial irregularities by detecting them quickly and thus resolving any issues that arise in a timely manner. This will help improve their efficiency and performance.
- It helps the auditor in his/her work detecting all the errors and frauds which are committed in the books of accounts.
- It helps to increase the accuracy and reliability of financial statement and books of accounts. It can help you detect errors early and address them before they get out of hand.
- Internal control helps to regulate the work of staffs through a division of work among the staffs in a scientific manner which helps to make the daily works of staffs effective.
- It helps the management to prepare and implement effective plans by providing correct and factual information. It will help point out the areas in which resources are being underutilized or wasted. And, it is a good morale booster for honest employees.
- It helps to put moral pressure on staffs. This is because there is the fear of their mistakes being caught by the internal auditor almost immediately.
Strong internal controls will ensure a company’s resources are utilized only for their intended purposes, greatly minimizing the risk of resource misuse.