What Is Internal Control?


Internal control is a term typically heard in a business setting and is broad in its scope. Internal control can encompass many different aspects of a business and is meant as a way to secure the business from wrongdoing. All companies usually have some form of control in place and those that don't will more than likely pay the price for it some day.


  • The purpose of an internal control in a business is to keep the company running smoothly without any wrongdoing by its employees. Wrongdoing may be intentional or unintentional, but having steps in place to catch mistakes or calculated activities can help a company save money, inventory, time or even its reputation. Internal control means that they are safe guards that the company leaders have put in place to watch for incorrect procedures. The employees of the company are the control.


  • Internal control can be placed anywhere in a company. You will find mos of the control where the money is. Whether it is in accounting or inventory areas, corporate leaders want to make sure they are not losing money. They will create an internal control to ensure that theft of any type is very difficult. Other controls fall into categories of quality to ensure the product is meeting company expectations, customer service to make sure employees are treating customers in the manner required, and safety to ensure that employees are not injured.


  • An example of an accounting control might be a separate employee signing the checks than the one that printed them. Also, most companies will have more than one person sign a check that is over a certain amount of money. Payroll might be processed by one employee and another may look at the reports. A company might even bring in auditors from a different location to look at the overall books to ensure there is no wrong doing. Inventory controls will make sure that all product is counted correctly. This not only keeps someone from walking off with product, but also insures that the inventory is correct for reporting on financial statements. One inventory control is the inventory count. Some do this only once a year while others will do it monthly. Quality control involves employees that will inspect random products to make sure that they are up to the company standards. Customer service employees might have their conversations monitored to watch for mistakes in communication or employee errors. Safety controls are usually throughout a company. Most will create an environment where any employee can remind another that they are not doing something in the proper way. Rules are set up for safety and employers usually encourage employees to turn others if they refuse to follow safety protocol such as wearing safety shoes, safety glasses, or even not walking through a certain area.


  • The benefits of internal control are many. From making sure that the company does not lose money because of different types of theft to making sure that employees are safe and unharmed, internal control can save a company a lot of headache, cost and time in the long run. Legal fees, court appearances, paperwork, injury pay, loss of customers and non productive employees can all be avoided by having the proper internal control in place to keep an eye on the process as a whole.


  • Internal control should be put in place in all work environments, but company leaders should make sure that it is set up in a way to make the employees feel like they are contributing to the operations as a whole. If it is set up wrong, it could come across as a feeling that the company does not trust its employees or that they are setting the employees against each other. An employee might not feel like he is helping the company but rather tattling on a co-worker or friend.

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