Internal Control in Business --- (Definition)

Every Business have objectives and goals, to achieve these goals organisation must be so designed to have proper internal control on it functions and activities. The question is what is Internal Control ?

Auditing Guideline "Internal Control" issued by Institute of Chartered Accountants of England and Wales defines internal control as:
"The whole system of controls, financial or otherwise, established by the management in order to carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to management policies, safeguard the assets and secure the completeness and accuracy of the records. The individual components of  an internal control system are known as "Internal Controls" or "Controls" ".

PIA-Internal Contol System

 Explanation:-
 It is the control of whole system, whether it is related to financial record or other areas like technical or legal etc.

• The rules and procedures of control are set by higher management.

• Internal control ensure that the polices and rules are followed or not.

• Internal control ensure that assets are properly acquired, used for business purpose only, and disposed off in accordance with the instructions laid down by management.

• The main purpose of internal control is the assurance that complete and accurate record of any transaction related to; Assets, liabilities, Revenue, Expense and Investment is properly maintained.

From the very comprehensive definition we come to conclusion that without proper internal control it is impossible to prevent staff from errors and frauds and entity may suffer heavy loss.

                                                                         Muhammad Asad Ishaq.
                                                                         ICMA ( Finalist)
                                                                         Institute of Cost and Management Accountants of Pakistan.