The topic of internal control has long been an issue for business. Management may view internal control as a set of forms, checklists, and templates that auditors require. However, internal control is much more.

Since the passage of the Sarbanes-Oxley Act (SOX), internal control (especially over financial reporting) has become a major focus for all organizations, regardless of their status as public, private, not-for-profit, sole proprietorship, partnership, or corporation. It is essential that managers understand and establish sound, effective, and proper internal controls for operations, compliance, and financial processes within the organization. Internal control can truly provide ultimate organizational value.

Internal controls are defined as the mechanisms, rules, and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud. Internal controls are a means by which an organization’s resources are directed, monitored, and measured. This includes operational and compliance activities. It plays an important role in preventing and detecting fraud and protecting the organization’s resources.

Internal control is affected by an organization’s structure, work and authority flows, people, and information systems, and is designed to help the organization accomplish specific goals or objectives. For instance, a small organization with limited resources may not be able to segregate duties with the same rigor that a larger organization can. However, that does not give small organizations an excuse to ignore the importance of that control. They must find other ways to mitigate potential issues. In any event, internal control is part of an organization’s overall responsibility and required due diligence to ensure its operations are effective. Management is the “keeper” and “inventor” of internal controls and must take ownership.

Learning Objectives
  • Discover and understand the concept of internal controls.
  • Identify the history behind internal controls.
  • Explore and comprehend the COSO Integrated Internal Control Framework.
  • Identify why internal controls are not infallible.
  • Discover and understand who maintains responsibility for internal controls.
  • Discover and understand methods to identify and document internal controls.
  • Explore and examine a generalized checklist of internal controls for various processes.
Last updated/reviewed: August 7, 2023
6 Reviews (39 ratings)

Reviews

3
Member's Profile
Good summary course of the COSO framework. Important concepts to understand when trying to write internal control narratives.

5
Member's Profile
Excellent overview of internal controls - the history, governing bodies, and processes for design and monitoring

4
Anonymous Author
Good review of COSO. Provided some examples throughout the text and review questions.

5
Anonymous Author
Good course - clearly stated, good kickoff to other internal control classes.

5
Member's Profile
Great course. The material covered greatly adds value to the IA function.

4
Anonymous Author
This is a great course on internal controls and why it is important.

Prerequisites
Course Complexity: Foundational
No advanced preparation or prerequisites are required for this course.
Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
Course Syllabus
COURSE MATERIAL
  Internal Controls - Why They Are Important (Text Based Course)PDF
REVIEW AND TEST
  REVIEW QUESTIONSquiz
 FINAL EXAMexam