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Basic Principles of Internal Control Cheat Sheet by

Basic Principles of Internal Control
common     principles     accounting     control     internal


Internal control is the process designed to ensure reliable financial reporting, effective and efficient operat­ions, and compliance with applicable laws and regula­tions. Safegu­arding assets against theft and unauth­orized use, acquis­ition, or disposal is also part of internal control.

The management style and the expect­ations of upper‐­level managers, partic­ularly their control policies, determine the control enviro­nment. An effective control enviro­nment helps ensure that establ­ished policies and procedures are followed. The control enviro­nment includes manage­ment's integrity, ethical values, and philos­ophy; a defined organi­zat­ional structure with competent and trustw­orthy employees, and the assignment of authority and respon­sib­ility.

Control activities

Are the specific policies and procedures management uses to achieve its object­ives. The most important control activities involve segreg­ation of duties, proper author­ization of transa­ctions and activi­ties, adequate documents and records, physical control over assets and records, and indepe­ndent checks on perfor­mance. A short descri­ption of each of these control activi­ties.

Principles - Control Activities

Segreg­ation of duties requires that different indivi­duals be assigned respon­sib­ility for different elements of related activi­ties, partic­ularly those involving author­iza­tion, custody, or record­kee­ping.
Proper author­ization of transa­ctions and activi­ties helps ensure that all activities adhere to establ­ished policies and guidel­ines.
Adequate documents and records include adequate supporting ocumen­tation and timely prepar­ation of documents.
Physical control over assets and records helps protect comapny’s assets. These control activities may include electronic or mechanical controls (such as a safe, fireproof files, and locks) or comput­er-­related controls dealing with access privileges or establ­ished backup and recovery proced­ures.
Indepe­ndent checks of perfor­man­ce, which are carried out by employees who did not do the work being checked, help ensure the reliab­ility of accounting inform­ation and the efficiency of operat­ions.

Common Core Principles


To identify and establish effective controls, Fund Managers and department heads must contin­ually assess the risk, monitor control implem­ent­ation, and modify controls as needed

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