What is 'internal control'?

Internal control refers to a structured process that organizations implement to help them achieve their objectives in various domains such as operations, financial reporting, and compliance with laws and regulations. Its primary purpose is to provide reasonable assurance that an organization will meet its goals and manage risks effectively. This involves the establishment of policies, procedures, and activities that guide staff in executing their tasks while minimizing the likelihood of errors, fraud, or irregularities.

Effective internal control systems are essential for ensuring accuracy in financial reporting, which helps stakeholders make informed decisions. They also assist in compliance with laws and regulations, reducing the risk of legal penalties and fostering accountability within the organization. Overall, the internal control framework enables organizations to operate more efficiently and effectively while safeguarding their assets.