Required information LO 06-C1: Define internal control and identify its purpose and principles. An internal control system consists of the policies and procedures managers use to protect assets, ensure reliable accounting, promote efficient operations, and uphold company policies. It can prevent avoidable losses and help managers both plan operations and monitor company and human performance. Principles of good internal control include establishing responsibilities, maintaining adequate records, insuring assets and bonding employees, separating recordkeeping from custody of assets, dividing responsibilities for related transactions, applying technological controls, and performing regular independent reviews. Principles of Internal Control 2 19.1.25 Knowledge Check 01 Item #1 Item #2 Item #3 Item #4 The work of one person acts as a check on another person to prevent fraud and errors. Responsibility for a task should be clearly established and assigned to one person. Use of cash registers, time clocks and personal identification scanners to improve internal control. Use of detailed records to help prevent loss of assets. Item #1 The work of one person acts as a check on another person to prevent fraud and errors. Responsibility for a task should be clearly established and assigned to one person. Use of cash registers, time clocks and personal identification scanners to improve internal control. Use of detailed records to help prevent loss of assets. Item #3 Item #4 Apply technological controls Divide responsibilities Establish responsibilities Maintain adequate records