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This evaluation will also provide assurance on whether the systems are functioning properly. The auditor should provide for tests in the audit programmed which could be in the form of interviews, internal control questionnaires, checklists, audit tests.

What is Internal Control?

Internal control in its broader sense is defined as a process affected by an organization’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories

For example document, legal and managerial compliance is simply intended to refer to compliance with the various laws, rules, policies, directives, and procedures that prescribe the guidelines and parameters that we must operate within. Some of these are self-imposed to ensure effective business and/or control practices. Following some of example but are not limited,

* Effectiveness and efficiency of operations

* Reliability of reporting

* Compliance with applicable rules, laws and regulations

* Internal Control components include Control Environment, Risk Assessment, Control Activities, Information and Communication and Monitoring

Most of the time the emphasis is on common control activities which may include the following:

*Segregation of functional responsibilities to create a system of checks and balances.

*A system of authorization and record procedures adequate to provide reasonable accounting control over assets, liabilities, revenues, and expenditures.

*Development of policies and procedures for prescribing and documenting the business and control processes. This should consist of a well thought out strategy and be reviewed and adjusted periodically to reflect changes in the business and control environment.

Procedures to evaluate internal controls:

*Description of system of internal control

*Flowcharts

*Internal Control Questionnaires

*Tests of compliance are performed to obtain sufficient evidence that the system is operating in accordance with the understanding the auditor obtained from the review. The nature, timing, and extent of tests of compliance are closely related to the control procedures and methods studied by the auditor.

Matters to be considered while evaluating internal controls

*Identification of risks

*Internal control structure put in place to prevent, detect, correct undesired events

*Whether the control structure is functioning as desired

*Identification of weaknesses in the structure and their effect on auditing procedures.

Internal control consists of five interrelated components which are as follows:

Control Environment: These factors include the integrity, ethical values personnel management’s philosophy and operating style authority and responsibility; and the attention and direction provided the management.

Risk Assessment: A prerequisite to risk assessment is the establishment of objectives for internally consistent. Risk assessment is the identification, analysis, and management of relevant risks which may impede the attainment of the organizations goals and objectives.

Control Activities: the policies and procedures which help ensure management directives are carried out. Control activities help ensure that necessary actions are taken to address risks, approvals, authorizations, verifications, reconciliations, reviews of operating performance, and segregation of duties.

Information and Communication: information must be identified, captured, and communicated in a form and time frame that enables people to effectively carry out their responsibilities.

Monitoring: Internal control systems need to be monitored; this means that over time management must assess the quality of the internal control system’s performance

Conclusion: Review and Evaluation the internal control structure the most of the useful way of preventing them in the future. Reviewing the structure or operations of similar organizations may also provide ideas on how to improve your organization

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