To prevent misleading reports to management, investors, and banks by employees and owners of a company. An independent accountant can create internal control to ensure that the financials are accurate. By setting up internal control it help protects assets and ensures that the assets are being used for business operation only. Keeps the business information accurate. Finally to keep employees and management compliant to laws and regulations.
Creating internal controls also helps prevent fraud from employees and management. Documenting everything that related to a transaction is important to keep. You should always have a paper trail to prove that the transition occur when it seem that fraud is occur. It is wise to keep financials report for 7 years before discarding them.
To set up internal controls for a business you need to control the environment to make it harder to prevent fraud. Have procedures that separate the task of each department so that there is a check a balance. Monitor that the environment and procedures to ensure that there is no flaw that can create the opportunity to commit fraud.
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