• Internal controls help an entity accomplish its objectives.business image by peter Hires Images from Fotolia.com
  
  Internal control is an integral part of managing an organization. It serve as a line of defense to help safeguard assets and to decrease possible fraud and detect errors. The five main components of internal control are: controlling the environment, risk assessment, control activities within the entity, information and communication, and monitoring.
  
  

Control Environment

• Integrity and ethical values maintained by management are the key elements for a control environment. Setting a control environment is the foundation for all the other standards needed for internal control. It adds discipline and structure to help influence internal control in a positive manner.
  
  

Risk Assessment

• One of the major obstacles management must identify are risks, both internal and external factors that can hinder the entity from achieving an objective. Management's ability to keep clear and concise objectives will help them to understand risks that arise and deal with them in a way that is most beneficial to the entity.
  
  

Control Activities

• Control activities are the policies and mechanisms that are used to enforce management's directives. Control activities occur at all levels of an entity. Examples of control activities could include, but are not limited to: controls over information processing; physical control over vulnerable assets (for example, securing cash or equipment that could vulnerable to loss); a segregation of duties within the entity; and proper execution of transactions and events.
  
  

Information and Communications

• In order for an entity to carry out its internal controls, information should be able to move broadly within the entity, with internal and external communications that are relevant to day-to-day operations shared in a timely manner.
  
  

Monitoring

• Internal control monitoring is needed to insure that day-to-day operations and duties are met by every department in the entity. Also, specific evaluations of monitoring can help with determining the effectiveness of the internal control at specific times, ensuring that any anomalies found can be dealt with in a timely manner before causing problems within other departments.