Why you need internal controls?

Internal control is a process that is implemented by the management of the organization or other outsourced personnel, designed to provide reasonable assurance regarding the achievement of the objectives that cover: compliance, operations and financial reporting

In small entities, this function in a simple form is done sometimes from the owner, who is also the administrator, but lacks the necessary experience and expertise. They refer to it as internal control, but it is so only in name and not in structure. In most cases, it consists of an employee who is in charge of the audit, and that's it. In medium-sized and big entities, there are different standards and systems that companies may choose to implement, i.e. (The COSO Frameworks of internal control and enterprise risk management, are very established standards in this area.) Some companies, however, don't even realize that internal control defers from the audit department and is not the same thing. They use the term interchangeably. A good understanding of the concept of control and how restrictions may be applied in practice is an essential skill that takes many years to fully acquire, however below we can show some of the benefits of having in place a system of internal control:

• improves reporting reliability.

• increases savings due to inspections.

• prevention of fraud.

• error prevention and spotting.

• enhance the effectiveness of employees.

• increases customer satisfaction.

• reduces risk exposure.

• helps in realizing operational objectives.

• improves processes.

• minimizes the risk of asset loss.

In designing and implementing a good system of internal control, business entities may often need help from external advisers, who have more significant experience in designing and implementing the most appropriate model that will work for them. They must not be held back from the costs, because they are minimal if we think of the benefits an internal control system introduces in an organization.