Internal Control--Its True Nature.

Abstract This article discusses the concept of internal control in auditing. The basic purposes of internal control are to bring reliability into the financial information system and to safeguard assets. The true nature of internal control can be identified and observed in the setting of the financial information system. It is generally accepted that a financial information system can exist with little or no internal control. Nevertheless, it is often stated that the financial information system can be strengthened by the addition of internal control. What must be done to strengthen a system in a situation in which internal control has not previously existed? The strengthening of a system is the direct result of adding internal control duties. Internal control duties are prescribed to safeguard assets and to make the system more reliable. Such duties reduce the opportunities for people to make errors or to perpetrate various types of fraud and other improper actions. Internal control duties are necessary because of the mental, moral, and physical weaknesses inherent in people.