Internal control is a whole system of controls financial and otherwise, established by the management for the smooth running of business; it includes internal cheek, internal audit and other forms of controls.
According to sap-6 entitled, â€œStudy and evolution of the accounting system and related internal control may be defined as â€œ the plan of organization and all the methods and procedures adopted by managementâ€™s objectives of ensuring as far as practicable the orderly and efficient conduct of its business including adherence to management policies the safe guarding of assets, prevention and detection of fraud and error, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. The system of internal control extends beyond those matters which relates control directly to the functioning of accounting system.â€
Internal control is a combination of the following:
1. Financial controls, and
2. Other controls
According to the institute of chartered accountants of India internal control is the plan of organization and all the methods and procedures adopted by the management of an entity to assist in achieving management objective of ensuring as far as possible the orderly and efficient conduct of its business including adherence to management policies, the safe guarding of assets prevention and detection of frauds and error the accuracy and completeness of the accounting records and timely preparation of reliable financial information, the system of internal control extends beyond those matters which relate to the function of accounting system. In order words internal control system of controls laid down by the management for the smooth running of the business for the accomplishment of its objects. These controls can be divided in two parts i.e. financial control and other controls.
â€¢ Controls for recording accounting transactions properly.
â€¢ Controls for proper safe guarding companyâ€™s assets like cash stock bank debtorâ€™s etc
â€¢ Early detection and prevention of errors and frauds.
â€¢ Properly and timely preparation of financial records I e balance sheet and profit and loss account.
â€¢ To maximize profit and minimize cost.
Other control â€“ Other controls include the following:
â€¢ Quality controls.
â€¢ Control over raw materials.
â€¢ Control over finished products.
â€¢ Marketing control, etc