Internal controls are the mechanisms, rules and procedures applied by the company to ensure the accuracy of financial and accounting information, ensure accountability and prevent fraud.
In addition to complying with laws and regulations and preventing employees from stealing assets or committing fraud, internal controls can help improve operational efficiency by improving the accuracy and timeliness of financial reporting.
Internal audits play a critical role in a company’s internal controls and corporate governance now that the Sarbanes-Oxley Act of 2002 has made managers legally responsible for the accuracy of its financial statements.