The importance of a control system within the business.

Essay by afrosamJunior High, 9th gradeB, November 2005

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Internal controls are methods or procedures adopted in a business to:

-Assist in achieving the businesses' objectives

- Ensure financial information is correct and reliable

- Ensure cooperation with all operational and financial requirements

- Protect its Assets

They are essentially checks and balances within a business. It's objective is to reduce errors, limit financial losses and prevent fraud. They also segregate duties within the company and limit one persons control over an entire area. For example-

never have one person writing, receiving and reconciling your business accounts.

As the owner of Millennium Land Developers, it is your responsibility to ensure that the business has a good internal control system. As they flow through the entire business to:

- Help align objectives of the business:

To make sure everything is covered in the reporting procedures and the activities currently undertaken by the business are in line with the objectives of the business.

- Safeguard assets:

Makes sure the physical and monetary assets of the business are safe from theft, errors and fraud.

- Prevent and detect fraud and error:

Enabling the internal control system quickly identifies fraud and errors when they occur.

- Allow action to be taken against undesirable performance:

A method of dealing with dishonesty or fraud if detected

- Reduce exposure to risks:

Minimising the probability of any unexpected events happening

- Ensuring proper financial reporting:

Maintains complete and accurate financial reporting requirements by management and legislation and minimising lost time by fixing mistakes and ensuring resources are efficient and mistake free when allocated

- Completeness:

That all the required information are included in the business reports. These include transactions and records.

- Accuracy:

Making sure that the right amounts are recorded into the correct accounts

- Authorisation:

Makes sure the correct level of authority deals with...