Internal Control and Internal Audit

Abstract

In public financial management (PFM), internal control systems refer to a range of management tools aimed at different broad objectives: first and foremost, to ensure an entity’s compliance with laws and regulations; second, to ensure the reliability of its financial data and reports; and third, to facilitate the efficiency and effectiveness of the entity’s operations. In this way, a sound internal control framework is designed to assure the public that government operations attain some basic fiduciary standards in several areas: guarding against the misuse and inefficient use of financial and human resources; safeguarding assets; achieving budgetary objectives, as set out in government policies and spending plans; countering fraud and error; and maintaining satisfactory accounting records to enable the organization to produce timely and reliable financial and management reports.¹ As such, internal controls can be regarded as one of the foundations of good governance in a country and the first line of defense against improprieties. They also provide the public with “reasonable assurance”² that if improprieties do occur, they will be made transparent and appropriately addressed.³