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Internal control systems

Introduction

1.1 Definition of internal control systems

 'The whole system of controls, financial and otherwise, established
by the management in order to carry out the business of the
enterprise in an orderly and efficient manner, ensure adherence to
management policies, safeguard the assets, prevent and detect fraud
and error and secure as far as possible the completeness and
accuracy of the records’.

 a system for management to control certain risks and therefore help
businesses achieve their objectives.

1.2 Internal controls and risk management

 The need for a robust system of internal control and risk management is seen
as a major element of good corporate governance.

 The UK Corporate Governance Code requires the board of directors to review
the system of internal control in their organisation, and satisfy themselves that a
suitable system is in place.

 Since profits are, in part, the reward for successful risk taking in business, the
purpose of internal control is to help manage and control risk appropriately
rather than to eliminate it.

1.3 Responsibilities

 The board of directors is responsible for the company's system of internal
control.

 All employees have some responsibility for internal control as part of their
accountability for achieving objectives.

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