{"id":262,"date":"2019-09-18T16:40:57","date_gmt":"2019-09-18T21:40:57","guid":{"rendered":"https:\/\/www.nicholls.edu\/internal-audit-department\/?page_id=262"},"modified":"2019-09-18T16:40:57","modified_gmt":"2019-09-18T21:40:57","slug":"internal-controls","status":"publish","type":"page","link":"https:\/\/www.nicholls.edu\/internal-audit-department\/audit-process\/internal-controls\/","title":{"rendered":"Internal Controls"},"content":{"rendered":"<p><strong><span style=\"font-size: 14pt;color: #ff0000\">Definition and Components of Internal Control<\/span><\/strong><\/p>\n<p>Internal Controls are operating practices or activities that are established to provide reasonable assurance that specific objectives will be achieved.<\/p>\n<p>Primary objectives of an internal control system are:<\/p>\n<ul>\n<li>Compliance with applicable policies, procedures, plans, laws, regulations and contracts;<\/li>\n<li>Reliability and integrity of information;<\/li>\n<li>Economic and efficient use of resources; and<\/li>\n<li>Safeguarding of assets.<\/li>\n<\/ul>\n<p>Accomplishment of these objectives increases the likelihood that the goals and objectives established by the University will be met.<\/p>\n<p>The<strong>\u00a05 \u201cComponents of Internal Control\u201d<\/strong>\u00a0represent those means by which the University can achieve its objectives:<\/p>\n<ol>\n<li><a href=\"https:\/\/www.nicholls.edu\/internal-audit-department\/audit-process\/internal-controls\/3\/\"><em>Control Environment<\/em><\/a> \u2013 sets the overall tone of the organization;<\/li>\n<li><em>Risk Assessment<\/em> \u2013 management\u2019s identification of risk;<\/li>\n<li><em>Information and Communication System<\/em> \u2013 a means of recording transactions and communicating responsibilities;<\/li>\n<li><em>Monitoring<\/em> \u2013 assessment of internal control over time; and<\/li>\n<li><em>Existing Control Activities<\/em> -policies and procedures established to ensure that management\u2019s directives are carried out.<\/li>\n<\/ol>\n<p>Controls are any action taken by management to increase the likelihood that established goals and objectives are achieved.<\/p>\n<p>Internal Control is not always good if:<\/p>\n<ul>\n<li>It is excessive.\u00a0\u00a0 A control that unnecessarily increases the complexity of a transaction process without adding value to the activity being controlled is ineffective and a waste of resources; and<\/li>\n<li>Have costs that outweigh the derived benefits.<\/li>\n<\/ul>\n<p><!--nextpage--><\/p>\n<p><strong><span style=\"color: #ff0000;font-size: 14pt\">Types of Internal Controls<\/span><\/strong><\/p>\n<p>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.\u00a0 Below are several examples of each control.<\/p>\n<p>Directive Controls<\/p>\n<ul>\n<li>Policies and procedures<\/li>\n<li>Laws and regulations<\/li>\n<li>Training seminars<\/li>\n<li>Job descriptions<\/li>\n<li>Meetings<\/li>\n<\/ul>\n<p>Preventative Controls<\/p>\n<ul>\n<li><a href=\"https:\/\/www.nicholls.edu\/internal-audit-department\/audit-process\/internal-controls\/4\/\">Segregation of duties<\/a> (authorization, record-keeping &amp; custody of the related assets should not be performed by the one same individual)<\/li>\n<li>Physical control over assets<\/li>\n<li>Locking office door to discourage theft<\/li>\n<li>Using passwords to restrict computer access<\/li>\n<li>Shredding documents with confidential information<\/li>\n<\/ul>\n<p>Detective Controls<\/p>\n<ul>\n<li>Exception reports which list incorrect or invalid entries or transactions<\/li>\n<li>Reviews and comparisons<\/li>\n<li>Reconciliations<\/li>\n<li>Physical counts of inventories<\/li>\n<\/ul>\n<p><!--nextpage--><\/p>\n<p><strong><span style=\"color: #ff0000;font-size: 14pt\">The Control Environment<\/span><\/strong><\/p>\n<p>The control environment, as established by the organization&#8217;s administration, sets the tone of an institution and influences the control consciousness of its people. Likewise, leaders of each department, area or activity establish a local control environment. This is the <em><strong>foundation<\/strong> <\/em>for all other components of internal control, providing discipline and structure. Control environment factors include:<\/p>\n<ul>\n<li>Integrity and ethical values;<\/li>\n<li>The competence of the organization&#8217;s people;<\/li>\n<li>Leadership philosophy and style; and<\/li>\n<li>Assignment of authority and responsibility.<\/li>\n<\/ul>\n<p><!--nextpage--><\/p>\n<p><strong><span style=\"color: #ff0000;font-size: 14pt\">Segregation of Duties<\/span><\/strong><\/p>\n<p>One of the primary elements (or components) of internal control is the control activity of segregation of duties which requires that one individual should not have the ability to perform multiple phases of a transaction.<\/p>\n<p>When the work of one employee is checked by another, and when the responsibility for custody of assets is separate from the responsibility for maintaining the records relating to those assets, there is appropriate segregation of duties. This helps detect errors in a timely manner and deter improper activities; and at the same time, it should be devised to prompt operational efficiency and allow for effective communications. Segregation can be divided into three basic categories.<\/p>\n<ul>\n<li>Separation of the custody of assets from accounting.<\/li>\n<li>Separation of the authorization of transactions from the custody of related assets.<\/li>\n<li>Separation of duties within the accounting function.<strong>\u00a0<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Definition and Components of Internal Control Internal Controls are operating practices or activities that are established to provide reasonable assurance that specific objectives will be achieved. Primary objectives of an internal control system are: Compliance with applicable policies, procedures, plans, laws, regulations and contracts; Reliability and integrity of information; Economic and efficient use of resources; [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":0,"parent":251,"menu_order":3,"comment_status":"closed","ping_status":"closed","template":"","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"class_list":["post-262","page","type-page","status-publish","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Internal Controls - Internal Audit Department<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.nicholls.edu\/internal-audit-department\/audit-process\/internal-controls\/\" \/>\n<link rel=\"next\" href=\"https:\/\/www.nicholls.edu\/internal-audit-department\/audit-process\/internal-controls\/2\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Internal Controls - Internal Audit Department\" \/>\n<meta property=\"og:description\" content=\"Definition and Components of Internal Control Internal Controls are operating practices or activities that are established to provide reasonable assurance that specific objectives will be achieved. 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