What are Internal Controls and why are they important?
Internal controls are systematic procedures implemented to achieve operational effectiveness and efficiency, mitigate human error and fraud that will provide reliable financial reporting, and encourage compliance with laws, regulations, and corporate policies. It is a means by which an organization’s resources are directed, monitored, and measured. It plays an important role in detecting and preventing fraud, and protecting the organization’s resources, both physical (e.g., machinery and property) and intangible (e.g., reputation or intellectual property such as trademarks).
Facts and Reality
- The opportunity to steal is more important than the need for money.
- A majority of employee theft goes undetected by management.
- Less than 10% of the employee population is responsible for mote than 95% of the total losses from employee theft.
- Nearly every business experiences some degree of employee theft.
- Nearly one-third of all bankruptcies is caused by employee theft.
Good controls encourage efficiency, compliance with company policies, and seek to eliminate fraud and abuse. It is a process companies develop and use internally for preventive and detective measures. Therefore, if companies do not implement internal controls, they are taking a very large risk of fraud, human error, and operational inefficiencies that can be fatal for the company.
Give us a call today to schedule an initial consultation. We will be glad to get to work to review and assess the effectiveness and efficiency of your company’s internal controls around its operating and accounting procedures to locate any weaknesses/deficiencies to enable you and your company to maximize on company production and profits.