About Controls

Internal controls are practices that protect or make more efficient use of the University's assets. They are the kinds of things you already do because they are generally just good business practices. Internal controls can involve anything from protecting computer files with passwords to making sure that the door is locked when everyone has gone home for the night.

Typically, management is responsible for developing an appropriate system of internal controls, but every employee is responsible for following and applying those practices. They may seem unimportant by themselves, but taken as a whole, they can have a major impact on the University's operations. Internal controls can be preventive, detective, or corrective in nature:

Preventive controls...

are designed to discourage or pre-empt errors or irregularities from occurring. They are more cost-effective than detective controls. Credit checks, job descriptions, required authorization signatures, data entry checks, and physical control over assets to prevent their improper use are all examples of preventive controls.

Detective controls...

are designed to search for and identify errors after they have occurred. They are more expensive than preventive controls, but still essential since they measure the effectiveness of preventive controls and are the only way to effectively control certain types of errors. Account reviews and reconciliations, observations of payroll distribution, periodic physical inventory counts, passwords, transaction edits, and internal auditors are all examples of detective controls.

Corrective controls...

are designed to prevent the recurrence of errors. They begin when improper outcomes occur and are detected and keep the "spotlight" on the problem until management can solve the problem or correct the defect. Quality circle teams and budget variance reports are examples of corrective controls.

Auditors evaluate the effectiveness of an operation's internal controls by first gathering information about how a unit operates, identifying points at which errors or inefficiencies are possible, and identifying system controls designed to prevent or detect such occurrences. Then, they test the application and performance of those controls to assess how well they work. You can evaluate controls in your department's operations by following the same process.

Go to the Internal Audit home page