Types of Internal Controls
Controls can be directive, preventative or detective. Directive controls are those designed to establish desired outcomes; preventative controls are designed to prevent errors, irregularities or undesirable events from occurring; and detective controls are those designed to detect and correct undesirable events which have occurred.聽 Below are several examples of each control.
Directive Controls
- Policies and procedures
- Laws and regulations
- Training seminars
- Job descriptions
- Meetings
Preventative Controls
- Segregation of duties (authorization, record-keeping & custody of the related assets should not be performed by the one same individual)
- Physical control over assets
- Locking office door to discourage theft
- Using passwords to restrict computer access
- Shredding documents with confidential information
Detective Controls
- Exception reports which list incorrect or invalid entries or transactions
- Reviews and comparisons
- Reconciliations
- Physical counts of inventories