About Controls

Internal controls are practices that protect or make more efficient use of the university's assets. They are the kind of things you already do because they are generally just good business practices. Internal controls can involve anything from protecting computer files with passwords to making sure that the door is locked when everyone has gone home.

Typically, management is responsible for developing an appropriate system of internal controls, but every employee is responsible for following and applying those practices. They may sometimes seem unimportant by themselves, but taken as a whole, they can have a major impact on the University's operations. Internal controls can be preventive, detective or corrective in nature:

Preventive controls are designed to discourage or pre-empt errors or irregularities from occurring. They are more cost-effective than detective controls. Job descriptions, required authorization signatures, data entry checks, physical control over assets to prevent their improper use and credit checks are all examples of preventive controls.

Detective controls are designed to search for and identify errors after they have occurred. They are more expensive than preventive controls, but still are essential since they measure the effectiveness of preventive controls and are the only way to effectively control certain types of errors. Account reviews and reconciliations, observations of payroll distribution, periodic physical inventory counts, passwords, transaction edits and internal audit are all examples of detective controls.

Corrective controls are designed to prevent the recurrence of errors. They begin when errors occur and are detected and keep the "spotlight" on the problem until management can solve the problem or correct the defect. Budget variance reports and quality circle teams are examples of corrective controls.

Internal auditors evaluate the effectiveness of an operation's internal controls by first gathering information about how a unit operates, identifying points at which errors or inefficiencies are possible, and identifying system controls designed to prevent or detect such errors. Then, they test the application and performance of those controls to assess how well they work. You can evaluate controls in your department's operations by following the same process.

Control Activities

Control activities are those specific policies and procedures that help ensure management objectives are achieved. They include a wide range of activities that occur throughout the University, by supervisory and front-line personnel. This is not an all-inclusive list, but here are some examples of common control activities:

Segregation of Duties
Duties are divided, or segregated, among different people to reduce the risk of error or inappropriate actions. For instance, responsibilities for authorizing transactions, recording them and handling the related asset should be divided.

Physical Controls
Equipment, inventories, cash and other assets should be secured physically, and periodically counted and compared with amounts shown on control records. Access should be restricted to those with authority to handle them.

Reconciliations
Comparisons should be made between similar records maintained by different persons to verify transaction details.

Policies and Procedures
Policies, procedures and even job descriptions should be established to provide guidance and training to ensure consistent performance at a required level of quality.

Transaction and Activity Reviews
Managers running functions or activities should review performance reports. They may relate different sets of data - operating or financial - to one another, together with analyses of the relationships.

Information Processing Controls
A variety of controls should be performed to check accuracy, completeness and authorization of transactions. Data entered should subject to edit checks or matching to approved control files. Numerical sequences of transactions should be accounted for, and file totals should be controlled and reconciled with prior balances and control accounts. Development of new systems and changes to existing ones should be controlled, as is access to data, files and programs.

Internal Audit and Control 

One of the Office of Internal Auditors objectives is to educate the university community about internal controls, and we have several resources to achieve this goal. We are available to present training sessions tailored to the needs of your department.