Investigating The Internal Controls Of The Business Environment, And Common Internal Control Measures

1214 Words Nov 27th, 2016 5 Pages
Fraud prevention is a concern to both small businesses and large corporations alike. Business owners place their trust into employees who are hired to perform duties that contribute to the success of the company. When that trust is broken, or ideally before this occurs, businesses must look to their internal controls in an effort to limit the opportunity for such malicious behavior. The purpose of this paper is to define internal controls, explain the purpose it serves in the business environment, and common internal control measures. Additionally, an example of internal control from this author’s employer will be discussed as well as an incidence of embezzlement found while researching this topic. Let’s first take a look at its definition and some examples.
Internal controls, as defined by Investopedia.com, are “methods put in place by a company to ensure the integrity of financial and accounting information, meet operational and profitability targets, and transmit management policies throughout the organization.” This system works best when applied to multiple divisions and deal with inter-departmental transactions. An example of the latter may be those occurring between the originating department from where the transaction is originated, supply management, and accounts payable. These methods can be broken down between a preventative and a detective category. Preventive controls are just such: those policies and procedures that prevent an incident from occurring.…

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