Objectives of Internal Control

Objectives of Internal Control

Each organization must have a system of internal control in place for achieving the preset goals. Other than accomplishing the desired goals and objectives of the organization, this system plays a very important role in any organization. The main objectives of internal control are as follows:

1. Compliance:  To  have  compliance with  law  and  accounting  practices that is generally accepted and followed in the country. The accounting process also needs to be in compliance with these.

2. Reliance: To increase the reliance on the internal systems, accounting practices should be followed by the organization, so that the chances of frauds are reduced.

3. Safeguarding: To safeguard the organization’s accounts, employees and assets by formation of fool-proof policies, rules and regulations.

4. Security: To provide security to customers, employees and property of the organization. Physical security systems like security guards, locks and anti-theft devices are used for providing protection.

5. Increased Efficiency:  To  assist  in human  resource  and  performance management,  and  to  keep  proper control  over  business  activities  to achieve maximum levels of efficiency.

6. Evaluation: To evaluate the accounting system for proper authorization of transactions.

7. Review and Correction: To review the working of the business, locate weak points in operations and to take corrective measures for proper working.

8. Authorization: To provide proper authority for purchase, sale, valuation, verification and possession of assets.

9. Delegation: To provide for division of duties among the employees where all staff members work cohesively.

10. Accurate Planning: To ensure that the auditor’s and the accountants of the organization make all the financial reports correctly and to ensure that financial planning is done accurately.

11. Resource Utilization: To ensure that all the resources, i.e., man, material, money and machines of the organization are optimally used.

12. Safeguarding of Resources: To protect the resources of the organization against mismanagement or fraud and to ensure that the company’s activities are in accordance with laws and regulations.

13. Setting future Corporate Goals: An efficient system of internal control helps the organization in goal setting. However, the organization should have certain policies, rules and regulations in place to achieve the preset goals.