Importance of Internal Control in Organizations

This assignment delves into the significance of internal control within organizations. It outlines key factors like risk assessment, activity control, monitoring, information communication, and control environment. The document highlights how these components contribute to an organization's success by ensuring financial integrity and achieving strategic objectives.

Running head: ACCOUNTING INFORMATION SYSTEM
ACCOUNTING INFORMATION SYSTEM
Name of the Student
Name of the University
Authors Note:

1ACCOUNTING INFORMATION SYSTEM
Table of Contents
Introduction..........................................................................................................................2
Discussion............................................................................................................................2
Conclusion...........................................................................................................................3
References............................................................................................................................4

2ACCOUNTING INFORMATION SYSTEM
Introduction
Internal Control plays a key role behind the success of any origination. It mainly uses
certain methodology which will help in ensuring the financial and information related to
accounting of an organization (Vijayakumar & Nagaraja, 2012). Various important factors in
relation to internal control like assessment of risk, controlling of various activities, analyzing or
monitoring, information and communication has been described in details.
Discussion
Internal Control Topics play an important role in the success of an organization. It
generally makes use of certain methods for ensuring the integrity of financial and accounting
information and transmit certain policies throughout the organization (Sadgrove, 2016). Internal
control works in the best form when it is applied to various division of project which mainly
deals in various departments of projects. Internal control is mainly distinguished between two
categories that is preventative or detective. Preventative internal controls are considered to be
first line of defense in a financial accounting system. Detective are certain backup which mainly
ensure that preventive internal controls in which operation are needed. Risk management is
considered to be an integral part of an organization (Hopkin, 2017). The board of directors is
responsible for internal control policy and management of risk. The goal of risk management in
an organization is providing supporting the strategy and proper achievements of aims or
objectives. The overall system of internal control in an organization mainly comprises of five
components which are control environment, assessment of risk, proper controlling of activities,
information for proper communication and lastly checking or monitoring.

3ACCOUNTING INFORMATION SYSTEM
Assessment of Risk: Assessment of risk mainly comprises of fraud, loss or misuse of assets or
money. Depending on results of risk assessment control indicators mainly ensure that
fundamental requirement is satisfied (Kuratko, Hornsby & Covin, 2014). Information regarding
the development of essential risk is identified and proper planning is provided to the board of the
organization to overcome risk.
Controlling of Activities: Common points of control are generally defined by set of
requirements for each process. Some of example of such internal control are authorization,
approval and proper analysis of things.
Monitoring: Various organization constantly keep a track of the effectiveness of various internal
control in them. Organizations should constantly upgrade their tool which will allow
transparency among and better communication between their business tools.
Information and Communication: Organization should have proper information regarding the
internal policies and procedure for various things like accounting, reporting and policies of
disclosure on the its website. Organization should establish various procedure regarding the
violation related to fraud and misconduct.
Control environment: The Board of Director of an organization bears the whole responsibility
of internal control within an organization. Organization must ensure internal control on financial
data is provided by making proper analyzation of control environment.
Conclusion
From the above discussion it can be easily stated that internal Control plays a vital role in
the success of any origination. Various important factors for internal control like assessment of

4ACCOUNTING INFORMATION SYSTEM
risk, controlling of various activities, analyzing or monitoring, information and communication
has been described in details in the above pages of report.
References
Hopkin, P. (2017). Fundamentals of risk management: understanding, evaluating and
implementing effective risk management. Kogan Page Publishers.
Kuratko, D. F., Hornsby, J. S., & Covin, J. G. (2014). Diagnosing a firm's internal environment
for corporate entrepreneurship. Business Horizons, 57(1), 37-47.
Sadgrove, K. (2016). The complete guide to business risk management. Routledge.
Vijayakumar, A. N., & Nagaraja, N. (2012). Internal Control Systems: Effectiveness of Internal
Audit in Risk Management at Public Sector Enterprises. BVIMR Management Edge, 5(1).