What is internal control in corporate governance?

Internal control in corporate governance refers to the system of policies, procedures, and practices that an organisation puts in place to ensure that its operations are conducted efficiently, effectively, and in compliance with relevant laws and regulations. It is typically overseen by the board of directors and senior management and is often documented in written policies and procedures that employees are expected to follow.

Key aspects of internal control in corporate governance include:

1. Risk management:

helping identify, assess, and mitigate risks that could potentially impact the organisation including financial risks, operational risks, and compliance risks.

2. Financial reporting:

ensuring the accuracy and reliability of financial reporting. This involves the review and verification of financial data, preventing fraud, and maintaining transparency.

3. Compliance:

ensuring that the organisation complies with applicable laws, regulations, and industry standards. This can involve monitoring activities, conducting audits, and implementing policies to ensure compliance.

4. Safeguarding assets:

protecting the organisation’s assets from theft, misuse, or damage including physical assets like inventory and equipment, as well as financial assets.

5. Efficiency and effectiveness:

aiming to improve the efficiency and effectiveness of the organisation’s operations. This can involve streamlining processes, reducing waste, and optimising resource allocation.

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