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The Institute of Internal Auditors defines internal controls as the methods or procedures used by an organization to safeguard assets; ensure reliability and integrity of information; ensure compliance with policies, laws, regulations, etc.; promote economical and efficient use of resources; and accomplish goals and objectives.
There are five types of control according to TheFreeDictionary.com. It includes management control performed by one or more managers; inventory control which involves the supervision of supply and storage and accessibility of items so that adequate supply is ensured and excessive oversupply is avoided; control or the activity of managing or exerting control over something; quality control which is the maintenance of standards so that manufactured goods are always at high quality; and accounting control to monitor on the system that provides quantitative information about the company's finances.
There are five interrelated components of the internal control process. These are the following:
1. Control (or Operating) environment - This is the atmosphere wherein the people conduct their activities and each of them carries out their control responsibilities. Responsibilities lie on management for 'setting the tone' for their organization by encouraging high levels of professional standards. To ensure an effective control environment, one must always remember that it is greatly influenced by how the individuals know their accountabilities. Examples of these internal control processes are provision of policies and procedures such as Administrative Procedures and Employee Handbook; discussion of ethical issues with employees and making sure they are clarified on things related to the organization's standards; and clear statement of responsibilities for internal control.
2. Risk Assessment ...
The solution defines internal controls and it also gives examples of internal controls that should be used in a small business. References included.