Internal controls are nothing more than policies or procedures put in place to safeguard an asset, provide reliable financial information, promote efficient and effective operations, and ensure policy compliance. For example: When you came to work this morning did you lock the doors to your house? If so, that's an example of an "internal control" you used to protect the assets you own. Generally there are three types of control:
- Preventative Controls - are designed to discourage errors or irregularities from occurring. For example: Processing a requisition only after it has been properly approved by the appropriate personnel.
- Detective Controls - are designed to find errors or irregularities after they have occurred. For example: Reviewing the monthly Statement of Account for activity in your area's general ledger MFK's.
- Directive Controls - are designed to encourage a desirable event. For example: written policies and training seminars assist in the accomplishment of area goals and objectives.