Chapter 2
Internal Control
Perhaps the most important function of the controller is to create and maintain the corporate financial control system. Doing so involves documenting the existing control structure, eliminating redundant controls, and adding new controls to cover potential risks arising out of new business situations. In order to properly assess risks, the controller must have a firm grasp of the general types of fraud and how to prevent them. This knowledge should extend to legally required controls over assets, such as those listed in the Foreign Corrupt Practices Act and the Sarbanes-Oxley Act. This chapter provides an overview of these topics.
Basic Elements
Many policies and procedures have been established to achieve the specific objectives of an organization. This set of procedures is called the internal control structure. Technically, appropriate control procedures apply to every function, to every activity of the enterprise. The emphasis in this chapter is on those controls relevant to a proper recording of transactions (income, expenses, assets, liabilities, and net worth) and the proper reporting thereof, together with safeguarding the assets of the business. The applicable control objectives, discussed later in this chapter, are a basic concern of the controller.
The controller should be aware of the various types of controls that must be interlinked to create a control system that adequately safeguards the company assets: accounting controls, administrative ...
