What are the main types of internal controls?

The main types of internal controls are categorized as preventive, detective, and corrective controls.

Preventive controls are designed to stop a potential error or fraud before it occurs. Examples include segregation of duties, access controls, and employee training, which are all focused on minimizing the risk of issues arising in the first place.

Detective controls, on the other hand, are established to identify and highlight any errors or irregularities after they have occurred. This might include audits, reconciliations, and monitoring of operations, helping organizations to catch problems in a timely manner.

Corrective controls serve to address and rectify issues that have already occurred, allowing organizations to respond effectively to mistakes or irregularities. This could involve policy revisions, additional training, or changes to processes to prevent similar issues from happening again.

This framework of preventive, detective, and corrective controls provides a comprehensive approach to managing risks and ensuring the effectiveness of internal controls within an organization. This categorization aligns with the key goals of maintaining the integrity of financial reporting, compliance with regulations, and effective operations.