What is meant by internal control?

Internal controls are processes put in place by management and staff in order to effectively administer a specific program and achieve its goals. Internal controls may be rules or procedures; for example, certain steps must be followed in issuing a payroll check. Internal controls may also be informal, for example, you may control access to administrative records by locking them in a file drawer.

Internal controls are designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

1. Effectiveness and efficiency of operations.
2. Reliability of financial data and reporting.
3. Compliance with applicable laws and regulations.