The human body works like every business system, how? For starters it is made up of different systems that work independently but are also integrated. The brain like the CEO runs the activities of the body. There is information flow, through the blood. Just as it is necessary for a business to make sales, it is also necessary for the human body to eat food. The business relates with its external environment and so does the body. The human body gives accounting report and can be audited. But one fascinating detail about a healthy human body is its ability to self-regulate.
As simple as the word self-regulate sounds, it is what separates healthy human bodies from unhealthy ones; it is what keeps the digestive system, respiratory system, circulatory system, nervous system and all other working effectively and efficiently in keeping the human body alive, healthy and running smoothly
If we are to substitute the word self-regulate for a business term it would be called internal control. Just as every human body need to self-regulate, every business needs an internal control system.
Need for Internal Control In businesses
– Achieving business objectives effectively and efficiently
– Run the business effectively and efficiently
– Safeguard the business’s assets
– Reduce fraud to the barest minimum
– Ensure proper financial reporting
– Ensure adherence to regulation
Factors that will ensure strong internal control
– General Business Culture
– Tone at the top
– Procedures and Policies
Internal control could be
Unlike the body that has a readymade internal control system, a business’s internal control system is built around the peculiarity of a business. Accordingly, all business systems need internal control, but not the same internal control system will suit all types of businesses, care should therefore be taken in creating internal control policies to ensure that it meets the needs and peculiarity of the business.
Threats to Internal Control Structure
– Management override
– Access to assets
– Substance and reality of control.
– Conflict of interest