Internal control is a broad concept that involves internal controls that controls risks to an organisation. The process assures an organisations accurate financial reporting, effectiveness and efficiency in operations and statutory compliance’s. It is a means by which an organisations resources are monitored, measured and directed playing an important role in preventing fraud and protecting the organisations resources.
The King Committee on Governance issued the King Report on Governance for South Africa 2009 stating that an audit committee is vital to ensure the integrity of integrated reporting and internal financial controls. The audit committee should have full oversight of financial reporting risks in order to align recommendations with global best practice business principles.
Conduct for boards and directors of listed companies, banks, and certain state-owned enterprises where established, including financial and regulatory aspects, but also advocated an integrated approach that involved all stakeholders. Although the code is not enforced through legislation, it does co-exist with a number of laws that apply to the Companies Act. It is however applicable to all companies listed on the main board of the Johannesburg Stock Exchange and companies with shareholder equity over R50 million. The King lll although not enforced through legislation encourages all companies to adopt the code.
The approach to Internal Financial Controls should ensure that a sensible balance is maintained between the costs of implementing and monitoring the framework and the benefits of such a framework.