Sources of international law

Managing a corporation or business can be a very daunting job, especially if an individual or group of individuals, are not properly prepared for the task of controlling a business by implementing an internal control system. An internal control system is a procedural guide that protects assets, ensures reliable accounting, promotes efficient operations, urges adherence to company policies, and urges compliance with accounting standards and laws. Because all companies posses some differences, internal control policies and procedures tend to vary as well. However, the fundamentals of Internal Control are a universally shared set of principles. These universally shared Principles are 1. Establishment of Responsibility, 2. Maintaining Adequate Records, 3. Insuring Assets and Bonding Key Employees, 4. Separate Record Keeping from Custody of Assets, 5. Dividing of Responsibility for Related Transactions, 6. Applying Technological Controls, and 7. Performing Regular and Independent Reviews.

The Establishment of Responsibilities states that responsibility of a task must not only be clearly established, but also assigned to one individual. This principle insures that responsibility is easily traced to a specific individual if a problem occurs. Additionally, proper order is maintained, and structure is asserted when fulfilling and completing duties. Another principle of internal control is the Maintaining of Adequate records. This principle calls for reliable recording of information which helps protect assets and ensure if employees are adhering to company policies and procedures. Maintaining adequate records also minimizes transaction errors, because source documents of the various accounts can be used to review the chart of accounts. In addition to the establishment of responsibilities and maintaining of adequate records, insuring assets and bonding key employees is also a part of good internal control.

In order to discourage the mishandling of assets by employees, the internal control of Insuring Assets means a business can protect itself against potential losses. Bonding Key Employees is another aspect of internal control that allows a company to purchase an insurance policy against theft, which as a result discourages bonded employees, because of  harsher sanctions. Another principle internal control is Separate Record Keeping from the Custody of Assets. This internal control prevents a person who has access to an asset from keeping the accounting records of that asset. Thus the risk of theft or waste of an asset is reduced, because record keeping is only accessible to a separate record holder. Alongside insuring assets and separate record keeping, The dividing of responsibility for related transactions is also a principle of internal control.

The Dividing of Responsibility for Related Transactions (also known as the separation of duties)  is an internal control that ensures the accuracy of one individual’s work, by checking it with the work of another individual. This control doesn’t imply duplicating the work of the individual, but rather separate work that has not been collaborated before hand. Another measure to ensure internal control is the principle of Applying Technological Controls. This principle utilizes devices ( cash registers, locks, and personal identification scanners) as a safeguard for assets. The records and accounts that technological controls keep, also can be used to effectively limit the improper use of information, through access limitations.

Finally, the principle of  Performing regular and Independent Reviews analyzes whether or not proper internal control procedures are being conducted. These reviews tend to be done by auditors or external sources that are not directly involved with the activities. Thus, ensuring a lower degree of bias, and establishing an external review of financial statements that are not only helpful to the organization, but also individuals outside the organization, such as stakeholders.

In conclusion an internal control system is a procedural guide that protects assets, ensures reliable accounting, promotes efficient operations, urges adherence to company policies, and urges compliance with accounting standards and laws. And, through the use of the principle internal controls Establishment of Responsibility,  Maintaining Adequate Records,  Insuring Assets and Bonding Key Employees, Separate Record Keeping from Custody of Assets, 5. Dividing of Responsibility for Related Transactions, Applying Technological Controls, and Performing Regular and Independent Reviews, the benefits of an internal control system are achieved.