Let's today go to the basics of Internal Control classification. Controls are basically classified as Preventive and Detective. I am discussing both the types of controls alongwith some examples.

Preventive Controls - Preventive Controls focus on preventing errors or exceptions. Here are a few examples of preventive controls:

1. Standards, policies and procedures are the most basic type of preventive control.

2. Segregation of duties also acts as a preventive control agtainst fraud.

3. Authorization / Approval levels also prevent the risk of an illegal act and are thus preventive in nature.

Detective Controls - Detective controls are designed to identify an error or exception after it has occured. A few examples are:

1. Exception reports. Review of various exception reports helps in detecting errors.

2. Reconcliations. After the fact reconcliations act as a double check against errors and exceptions.

3. Periodic Audits also act as a very good detective control.

More on Internal Controls..>>

Designing Internal Controls
Internal Control Deficiency
Company Level Vs. Company Wide Controls