Internal controls are safeguards a company implements to protect sensitive financial information. These safeguards can be universally accepted or unique to the company. Internal controls typically centre around the company’s accounting information system, which is the primary function for moving financial information through a company.
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Internal controls help companies direct, monitor and measure the effectiveness of their accounting operations. While internal controls often focus on limiting abuse or fraud by employees, they also provide owners and managers with reasonable assurance that financial statements are accurate, timely and valid.
Owners and managers can use internal controls to limit the number of individuals who have access to the company’s accounting information system. This helps limit the opportunity for abuse of sensitive information. Owners, managers and supervisors may also take an active role when enforcing internal controls, keeping them at the forefront of the accounting information system.
Internal controls are often implemented at the organizational and transaction levels of a company’s accounting information system. Organizational-level controls ensure the company follows all applicable standards, laws and regulations. Transaction-level controls ensure each accounting process achieves the company’s goals and objectives.
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