COSO Definition of Internal Control

Internal control is a process, effected by an entity’s board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

• Effectiveness and efficiency of operations
• Reliability of financial reporting
• Compliance with applicable laws and regulations

Key Concepts

• Internal control is a process. It is a means to an end, not an end in itself.
• Internal control is effected by people. It’s not merely policy manuals and forms, but people at every level of an organization.
• Internal control can be expected to provide only reasonable assurance, not absolute assurance, to an entity’s management and board.
• Internal control is geared to the achievement of objectives in one or more separate but overlapping categories.