Internal Controls and Investigations

Summary

"Internal controls" are the measures an organization uses to manage risks and ensure that the organization's operations work as intended. They also help an organization (1) use and provide accurate and reliable information; (2) comply with laws, regulations, policies and procedures; (3) reduce the organization's exposure to waste, inefficiency, fraud and theft; and (4) monitor the performance of each business unit of the organization.

Internal controls are particularly important for public companies since the enactment of the Sarbanes-Oxley Act ("SOX") in 2002. SOX requires public companies to (1) establish and maintain adequate internal controls and procedures for financial reporting; and (2) assess the effectiveness of their internal controls in their annual reports.

Both preventive and detective controls are essential to an effective internal-control system. Preventive controls, such as separation of duties and proper authorizations, deter or prevent unwanted events from happening. Detective controls, such as inventories and audits, detect whether unwanted events have already occurred.

Internal controls may be designed to meet either general standards (which describe an organization's objectives) or specific standards (which describe how to achieve those objectives). For example, an organization may set a general standard of reasonable assurance of meeting its objectives, and it may set specific standards such as recordkeeping, authorization, separation of duties, supervision, or security of assets and records to provide the organization with reasonable assurance of meeting its objectives.

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Key Resources

For your convenience, ACC has compiled the following key resources to assist you in your compliance efforts.

For more try searching ACC's online library for "Internal Investigation"

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