The audit is an important activity to ensure that there is sufficient accuracy and transparency in the presentation of the financial statements of the company. But in order to ensure the accuracy in the preparation of the financial statements, it is extremely important that there are sufficient internal controls in all the aspects of not only the financial reporting but also in all aspects of the business.
The main objectives of internal control are:
a. To ensure that all transactions are executed in accordance with management’s general or specific authorization.
b. To ensure that all the transactions are promptly recorded in the correct amount and correct account.
c. To ensure that the assets are safeguarded from unauthorized access, use, or disposition.
d. To ensure that the recorded assets are compared with the existing assets at reasonable intervals and appropriate action is taken with respect to differences if any.
Internal controls are the responsibility of management. And under U.S. GAAP the auditors are required to express an opinion on the firm’s degree and effectiveness of internal controls.