internal control
A physical or procedural mechanism that monitors and reduces *risk in an organization’s financial and operational activities. In its 1992 report *Internal Control - Integrated Framework, the *Committee of Sponsoring Organizations of the Treadway Commission (COSO) offered an influential definition of internal control as "a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of an organization’s objectives." The objectives of internal control were analyzed by COSO into three categories: (i) the *effectiveness and *efficiency of operations, (ii) the reliability of *financial reporting, and (iii) *compliance with applicable laws and regulations. The safeguarding of *assets is often identified in corporate governance literature as a separate internal control objective, but it is included in category (i) under the COSO framework. The existence of a satisfactory system of internal control is one of the *postulates of auditing elaborated by *Robert Khun Mautz and Hussein A. Sharaf. Although many of the concepts of internal control appear to be relatively recent ones, the underlying philosophies of internal control (Tike the safeguarding of assets and the effectiveness of operations) have a long history. The concept of internal control has even been analyzed in the context of the ancient Jerusalem Temple from the ninth century BCE to the first century CE (Fonfeder et al., 2003). See also *control risk, *detective control, and *preventative control. Further reading: Chambers, A. (2002); COSO (1992)

Auditor's dictionary. 2014.

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