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Internal control, as defined by accounting and auditing, is a process for assuring of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization.
Finance-oriented control systems are primarily based on financial accounting data, such as costs, earnings or profitability, whereas operations-oriented control systems are primarily based on non-financial data that focus on operational output and quality, for example service volume, employee turnover, or customer complaints. [citation needed]
In accounting, the controlling account (also known as an adjustment or control account [1]) is an account in the general ledger for which a corresponding subsidiary ledger has been created. The subsidiary ledger allows for tracking transactions within the controlling account in more detail.
An accounting information system (AIS) is a system of collecting, storing and processing financial and accounting data that are used by decision makers.An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources.
] Information exchange (including sensitive data) within a supply chain is necessary to ensure its control, with coordination among in-house information systems. The requirements for management accounting in supply chains are significantly higher than the provision of key figures, but this is a fundamental task.
Some researchers have criticised control self-assessment as a flawed approach as the way risk is defined and measured is unsophisticated. In particular, control self-assessment may understate risk by not identifying extreme downside risk. An extreme downside risk is a highly improbable event that would have catastrophic consequences if it occurred.
An entity-level control is a control that helps to ensure that management directives pertaining to the entire entity are carried out. These controls are the second level [ clarification needed ] to understanding the risks of an organization.
According to the Institute of Management Accountants (IMA), "Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization ...