Internal control consists of all the related methods and measures adopted within an organization to:
- Safeguard its assets from employee theft, robbery, and unauthorized use.
- Enhance the accuracy and reliability of its accounting records. This is done by reducing the risk of errors (unintentional mistakes) and irregularities (intentional mistakes and misrepresentations) in the accounting process.
Under the Sarbanes-Oxley Act, all publicly traded U.S. corporations are required to maintain an adequate system of internal control. Companies that fail to comply are subject to fines, and company officers may be imprisoned.