AUD Internal Control

Internal Control

A system of internal control consists of policies and procedures designed to provide management with reasonable assurance that the company achieves its objectives and goals .

Management has three broad objectives in designing an effective internal control system:

1. Reliability of financial reporting.
2. Efficiency and effectiveness of operations.
3. Compliance with laws and regulations.

1. Reliability of financial reporting;

• management is responsible for preparing statements for investors, creditors, and other users.
• Management has both a legal and professional responsibility to be sure that the information is fairly presented in accordance with reporting requirements such as GAAP.

2. Efficiency and effectiveness of operations.

• Controls within a company encourage efficient and effective use of its resources to optimize the companys goals.
• An important objective of these controls is accurate financial and nonfinancial information about the companys operations for decision making.

3. Compliance with laws and regulations.

• Section 404 of the sarbanes-Oxley Act requires management of all public companies to issue an internal control report that includes the following;
• A statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting