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In India, internal control is managed and governed by the provisions laid down under the Companies Act of 2013 and the Securities Exchange Board of India. Internal controls are the systems, strategies and processes that an organisation or a business inculcate in the operating procedure to avoid or to prevent mismanagement and fraud in its financial statements. This article thoroughly deals with the benefits and reasons why organizations and businesses should implement internal control.
Table of Contents
Internal controls are implemented by businesses to ensure that the reliability, accuracy and effectiveness of the financial documents or statements are maintained, and it is also done to achieve their goals and objectives. Businesses generally inculcate technological, administrative and some physical strategic tactics to better deal with their financial information and to prevent the leak and misuse of their confidential financial statements and documents. By implementing these, businesses and organisations can improve and can enhance their overall productivity and efficiency.
However, it is important to upgrade and update the internal control of the businesses to ensure that they are updated and in pace with the latest technology and the present business atmosphere.
Some of the common controls include physical controls, record-keeping, documentation, Information Technology controls etc. These examples are mentioned below in great detail below:-
These are some of the examples of primary internal controls that businesses and organisations often use to reduce the risk of financial losses, improve the accuracy of financial reporting, enhance overall efficiency and mitigate the associated risks.
The procedure of implementation of internal control in businesses and organisations involves several steps. These steps are given below in detail:-
These reasons are listed below in an elaborated manner:-
To conclude, it can be said that internal controls in any business or organisation are really important to mitigate any risk and to prevent leaks of any sensitive or confidential information into unauthorised hands. It is also important from the business perspective as it increases the overall efficiency and enhances the productivity of the business.
Also Read:Internal Controls- A Guide for directorsInternal Control System- Analysis of Benefits & Limitations
Seep is a lawyer by profession. She has done BA LLB and now shifted to full-time legal writing. She has extensive prior experience of freelance content writing and has worked for both Indian and international clients. She is vehemently curious and overtly passionate about so many things like blogging, reading, writing and travelling. She always wanted to explore the domains of the unconventional field of law. She has extensive experience in the area of corporate law and in drafting both Indian and International agreements as well. Her driving force is versatility and flexibility. She doesn’t restrict herself only to the field of law.
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