What are Internal Controls?
Internal control is defined as a process affected by the university and its governing board, its administration, faculty and staff, designed to help the university accomplish its goals and objectives. Internal controls provide reasonable assurance regarding the achievement of the goals in the following categories -
- Compliance with applicable laws and regulations.
- Effectiveness and efficiency of operations.
- Reliability of financial reporting.
The system of internal controls goes far beyond the accounting functions and financial department of an university or any organization.
Types of Internal Controls
There are three main types of internal controls -
- Preventative - Preventative controls are what most universities strive to implement at all times. This type of control is aimed at preventing any errors or irregularities from occurring which may have negative effects on the university.
- Detective - Detective controls are designed to find out and discover the different errors or irregularities which may have occurred and thus, can affect the university's ability to achieve its objectives.
- Corrective - Corrective controls work to try and fix the problem which may have arisen.
What are Internal Controls - REALLY?
Internal controls can be complex, but internal controls in their simplest form are anything we do to help us achieve our objective. We all use internal controls to some extent in our daily lives, some examples -
- We lock our homes before we leave for work - the objective is to prevent unwanted entry into our homes, thus safeguarding our household contents.
- Would you leave your credit card or social security number where everyone would have access to them? You most likely would not - the objective is to prevent identity theft and loss of money.
- You keep your on-line banking password in your memory and not written on the back of your keyboard - to prevent unwanted access to your funds, the objective is to safeguard your assets.
- Some install security/surveillance systems in their homes and businesses - the objective is to deter, prevent unwanted entry, thus safeguarding assets. Surveillance systems act as a detective control to identify the perpetrator.