Internal Control

Good day, everyone! Today's topic, a very important one for anybody running a business, is about the benefits of internal control in limiting exposure to unnecessary risk. The role of internal control is to establish a strong and well executed check and balance system throughout a corporation by utilizing audits for an oversight of operations. Internal audits ensure compliance of regulations by defining efficient ways to reduce the risks of asset loss. Risk assessment, monitoring, information and communication, and control operation environment are essential components to the success of an organization.

Insurance Companies use internal audits to verify that procedures are followed and Errors and Omissions risk is minimized. This is done to prevent and correct operations which raise risk and decrease their overall productivity. IIA is a UK based company which prides itself in creating compliance guidelines for the public by publishing a large knowledge base of risk management. IIA is a tool for companies to assure corporate social responsibility and control of internal operations.

Weak control systems can produce undesirable business operations. These systems can be influenced by communication failures between departments and insufficient financial statements which increase the need of risk management. With increased emphasis on the importance of training and using efficient accounting systems along with financial journals, cooperation, and avoiding the consolidation of financial statements, risk can be lowered, therefore creating a strong foundation for a company’s operating system.

Sources:
http://www.ucop.edu/ctlacct/under-ic.pdf
http://www.iia.org.uk/en/Knowledge_Centre/Academic_research/index.cfm
http://www.gm.com/corporate/investor_information/docs/fin_data/gm06ar/content/financials/mar/mar_01.html