What Is Internal Control and Its Role in Banking
- Леонид Ложкарев
- a few seconds ago
- 19 min read
Every American bank faces constant pressure to protect assets and maintain trustworthy reporting while meeting regulatory expectations. For internal auditors and compliance officers, understanding the principles behind internal control is not just about following procedures—it’s about building a foundation for safe and sound banking operations. By exploring how internal control frameworks work, you’ll gain practical insights into management oversight, risk recognition, and the powerful mechanisms that drive compliance and long-term profitability.
Table of Contents
Key Takeaways
Point | Details |
Comprehensive System | Internal control in banking is a multifaceted system that ensures safety, accuracy, and regulatory compliance, integral to achieving strategic objectives. |
Essential Components | The COSO framework outlines five key components—control environment, risk assessment, control activities, information and communication, and monitoring—that must work together effectively. |
Preventive vs. Detective Controls | Balancing preventive and detective controls is critical; over-reliance on one can either lead to operational inefficiencies or vulnerabilities to fraud. |
Regulatory Compliance | A strong internal control system must not only enhance operational efficiency but also comply with stringent banking regulations and requirements. |
Defining Internal Control in Banking
Internal control in banking is not a single document or policy—it’s a comprehensive system of processes, procedures, and oversight mechanisms that work together to ensure a bank operates safely, achieves its financial objectives, and maintains accurate reporting. The Basel Committee on Banking Supervision defines internal control as a critical component of bank management, forming the foundation for sound banking operations. At its core, internal control exists to provide reasonable assurance that your institution will meet its strategic goals, sustain profitability over the long term, and produce reliable financial and managerial information that stakeholders can trust.
Think of internal control as the operating system running behind the scenes in your bank. Just as an operating system manages thousands of processes simultaneously to keep your computer functioning, internal control manages the intricate interactions between different departments, systems, and personnel. It encompasses management oversight at the board and executive level, systematic risk recognition across your business lines, specific control activities embedded in daily operations, clear information flows that keep everyone informed, and ongoing monitoring mechanisms that catch problems before they escalate. For compliance officers and internal auditors in the U.S. banking sector, understanding this definition matters because it shapes how you design audit procedures, evaluate management’s effectiveness, and report findings to your audit committee.
The COSO framework identifies five essential components that comprise an effective internal control system: the control environment (the culture and tone your bank sets), risk assessment (identifying what could go wrong), control activities (the specific procedures preventing or detecting errors), information and communication (ensuring people have what they need to do their jobs), and monitoring activities (the ongoing evaluation of whether controls are working). None of these components stands alone. A strong control environment without robust control activities leaves you exposed. Excellent monitoring without clear communication creates confusion. Your job as an internal auditor or compliance officer involves evaluating whether all five components function together in an integrated manner, not just checking whether each piece exists independently.
What separates banking from other industries is the regulatory intensity surrounding internal control. Your bank operates under constant scrutiny from regulators like the Federal Reserve, OCC, or FDIC, each with specific expectations about how internal control should function. This means your internal control system must not only support operational efficiency and accurate reporting but also demonstrate compliance with banking regulations, capital requirements, and consumer protection laws. When you’re assessing whether internal control is effective in your bank, you’re really asking three questions: Are we achieving our business objectives? Can management trust the financial information we produce? And are we complying with applicable laws and regulations? An effective internal control system answers yes to all three.
Pro tip: When evaluating internal control effectiveness, document not just what controls exist but how they interact across functions—this systemic view is what regulators expect and what actually prevents major failures.
Types of Internal Control Activities
Internal control activities are the specific procedures and policies your bank implements to prevent errors, detect problems, and ensure objectives are achieved. These activities form the operational backbone of your control system, and they come in two fundamental flavors: preventive controls and detective controls. Understanding the distinction between them is essential for your audit work because each type serves a different purpose, requires different testing approaches, and plays a unique role in your bank’s risk management strategy. The Basel Committee outlines that control activities should operate throughout your organization at all levels and functions, meaning they cannot exist in isolation within a single department or function.
Preventive controls stop problems before they happen. These are your first line of defense against errors, fraud, and compliance violations. Segregation of duties stands as the classic preventive control in banking. When you separate the authorization, recording, and reconciliation of transactions across different people, you make it far more difficult for any single individual to commit errors or fraud without detection. If one person processes a wire transfer, a second person approves it, and a third person reconciles it against bank statements, collusion becomes necessary to hide wrongdoing. Authorization and approval procedures represent another essential preventive control, ensuring that transactions meet specified criteria before they proceed. In loan origination, for example, requiring supervisory approval based on loan amount and borrower creditworthiness prevents underwriting decisions from falling outside your bank’s risk appetite. Access controls limiting who can enter data into core systems, password requirements, and system segregation all function as preventive controls. The strength of preventive controls lies in their ability to stop problems at the source, reducing the volume of issues your detective controls must catch.
Detective controls identify problems after they occur. These controls operate on the assumption that despite your best preventive efforts, some issues will slip through, and your job is to find them quickly. Reconciliation processes form the backbone of detective controls in banking. When you reconcile your general ledger to subsidiary records, balance your loan portfolio to individual loan files, or compare your internal transaction records to external bank statements, you’re detecting discrepancies that preventive controls missed. Transaction reviews represent another critical detective control, where loan officers review a sample of underwritten loans, compliance officers test a portion of customer transactions for suspicious activity, or internal auditors select transactions to examine in detail. Exception reports generated by your systems flag unusual transactions that deviate from normal patterns, alerting you to investigate further. Variance analysis comparing actual results to budgets or prior periods reveals unexpected trends. Preventive and detective controls work together to form a complete control system, with preventive controls reducing the frequency of problems and detective controls ensuring that problems which do occur get identified and corrected promptly.
Your role as an internal auditor or compliance officer involves evaluating whether your bank deploys the right mix of preventive and detective controls. A bank relying too heavily on preventive controls might miss emerging fraud schemes that require detective mechanisms to uncover. Conversely, a bank over-relying on detective controls operates inefficiently, allowing preventable errors to occur and then spending resources fixing them after the fact. The optimal control environment includes robust preventive controls at critical transaction points combined with targeted detective controls positioned to catch exceptions that slip past prevention. Management oversight, approval workflows, and reconciliation procedures should permeate your organization across lending, deposits, treasury, operations, compliance, and technology functions. These controls should operate continuously, not just during period-end close processes or annual reviews.
Here’s a concise comparison of preventive and detective controls in banking:
Aspect | Preventive Controls | Detective Controls |
Primary Goal | Block errors or fraud in advance | Identify issues after they occur |
Common Activities | Segregation of duties, access limits | Reconciliations, exception reports |
Timing | Before transaction execution | After transaction processing |
Business Benefit | Minimizes losses, reduces incidents | Enables corrections, flags breaches |
Pro tip: When testing controls in your audit procedures, document both the preventive and detective elements in each process, then assess whether their combined strength adequately addresses the identified risk—this gives you a complete picture for your audit committee.
How Internal Control Systems Operate
Internal control systems do not function as static documents gathering dust in a compliance folder. They operate as living, breathing processes that run continuously across your bank, involving your board of directors, management at all levels, and frontline personnel working together toward common objectives. Internal control systems function through formal policies and procedures designed to safeguard assets, ensure accurate accounting, and promote operational efficiency. The key distinction is that effective systems operate on an ongoing basis, not just during annual audits or regulatory examinations. Your bank’s internal control system must assess risks continuously, implement controls that respond to those risks, communicate relevant information throughout the organization, and monitor whether controls are actually working in practice. This constant cycle ensures that your control system adapts as your business changes, new risks emerge, and regulatory requirements evolve.
The operational flow of an internal control system begins with the control environment, which sets the tone for everything else. The board of directors and senior management establish ethical values, define expectations for integrity and competence, and demonstrate their commitment to internal control through their actions and resource allocation. When your CEO reinforces the importance of compliance in meetings, when your board audit committee asks tough questions about control deficiencies, and when management holds people accountable for control violations, you create an environment where controls actually function. Without this foundation, even the best designed controls will fail because people will find workarounds. From there, the system moves into risk assessment, where your bank systematically identifies what could go wrong across lending, deposits, treasury, technology, and other business lines. As a compliance officer, you might identify the risk that loan officers could approve loans that violate regulatory capital requirements. As an internal auditor, you might identify the risk that transaction monitoring systems could fail to detect suspicious activity patterns. These identified risks then drive the selection and design of control activities discussed in the previous section. Your bank implements segregation of duties in loan approvals, establishes reconciliation procedures for suspicious activity alerts, and requires supervisory reviews of exceptions. Simultaneously, your bank establishes information and communication systems ensuring that relevant information flows to the right people at the right time. Loan officers receive updates on changing underwriting standards, compliance personnel receive alerts when certain transactions are flagged, internal auditors receive management reports on control testing results, and your board receives quarterly reports on control effectiveness.
The final operational component is monitoring, which transforms internal control from a planned system to an active one. Internal control systems operate through interrelated components that work together to mitigate risks and support organizational objectives. Monitoring occurs at multiple levels in your organization. Line managers perform ongoing monitoring by reviewing their teams’ daily activities, reviewing transaction exceptions, and following up on variances from expectations. Your internal audit function performs periodic testing of controls, selecting samples of transactions to verify that preventive and detective controls are operating as designed. Your compliance department monitors adherence to regulatory requirements through ongoing testing and periodic reviews. External auditors conduct annual testing of internal controls over financial reporting. These monitoring activities generate findings about control deficiencies, which get communicated back to management and the board, creating feedback loops that drive improvements to the control system. Here is the critical point: internal control systems cannot eliminate all risks. They cannot prevent a determined fraudster with access and knowledge from committing fraud if that person is willing to accept the consequences. What they accomplish is significantly reducing the likelihood of unintentional errors, detecting fraud when it occurs, ensuring compliance with regulations, and protecting your bank’s assets and reputation. As risks change, as technology evolves, and as regulations shift, your control system must adapt accordingly. A control that operated effectively five years ago may be obsolete today if your business model has changed or regulatory requirements have tightened.
Pro tip: When evaluating whether your control system is actually operating effectively, assess not just the design of controls but their consistent execution in practice—documentation, sample testing, and management interviews should all confirm that controls are functioning as intended, not just theoretically sound.
COSO and SOX Compliance Fundamentals
If you work in U.S. banking compliance or internal audit, you cannot escape COSO and SOX. These two frameworks have shaped how American banks think about internal control for the past two decades, and understanding their relationship is essential for your audit procedures and compliance assessments. The COSO Internal Control—Integrated Framework provides a comprehensive model for organizations to design, implement, and evaluate internal controls. The framework focuses on five components that you already know from previous sections: control environment, risk assessment, control activities, information and communication, and monitoring. COSO is not a regulation—it is a best practice framework developed by the Committee of Sponsoring Organizations. However, the Sarbanes-Oxley Act requires public companies to comply with specific internal control requirements, and COSO became the de facto standard for meeting those requirements. When your bank’s chief financial officer certifies the effectiveness of internal controls over financial reporting under SOX Section 404, that certification is typically based on COSO principles. This is why COSO matters to you. Your audit work, your testing procedures, and your documentation standards are all designed around COSO’s framework.
SOX Section 404 created a legal mandate that transformed how American public companies approach internal control. The law requires management to annually assess and report on the effectiveness of internal controls over financial reporting. More importantly, SOX requires that your bank’s external auditors attest to management’s assessment, adding a verification layer on top of management’s self-evaluation. This means your bank must not only have internal controls that actually work but must also document them thoroughly enough that external auditors can test them and conclude whether they are effective. The 2013 update to the COSO framework strengthened this compliance approach by emphasizing a risk-based perspective. Rather than implementing generic controls everywhere, your bank should implement controls proportionate to the risks you actually face. A large bank with complex derivatives operations needs different controls than a smaller community bank focused on traditional lending. COSO 2013 also emphasized governance oversight, risk management integration, operational complexity, technology reliance, and fraud prevention. For compliance officers, this means your anti-fraud program is no longer optional or separate from your internal control framework—it is an integrated component of how your bank manages risk. For internal auditors, this means your testing should assess whether controls actually address identified risks rather than just verifying that controls exist and operate.
The practical application of COSO and SOX in your bank happens through several interconnected processes. Your management team conducts a control environment assessment, evaluating whether your bank’s tone at the top supports compliance and whether ethical values are genuinely embedded in your culture. Your risk management function conducts risk identification and assessment, documenting the significant risks that could prevent your bank from achieving its financial reporting objectives. Your operational teams implement control activities designed to mitigate those specific risks. Your finance, compliance, and technology teams establish communication channels ensuring that control information flows appropriately. Your internal audit function performs monitoring activities, testing controls to determine whether they are operating effectively. All of this documentation, combined with management certification and external audit attestation, demonstrates SOX compliance. The challenge is that this is not a checkbox exercise. A bank that treats COSO and SOX as documentation requirements rather than operational necessities will eventually fail. Controls that are well-documented but not actually executed will be discovered during audit testing. Management certifications that lack adequate support will expose executives to personal liability. This is why your role matters—you are not just verifying that controls exist; you are ensuring that your bank’s control framework actually prevents errors, detects fraud, and maintains reliable financial reporting.
One critical distinction your bank must understand is the difference between internal controls over financial reporting (ICFR) and broader operational controls. The COSO framework provides a comprehensive model for designing, implementing, and evaluating all types of internal controls. However, SOX Section 404 specifically focuses on ICFR—controls that affect the accuracy and completeness of financial statements. Your bank’s credit underwriting controls affect your risk profile, but they may not directly affect financial reporting accuracy. Your customer service controls affect customer satisfaction, but they may not affect financial statement reliability. SOX compliance requires your bank to identify which controls actually impact financial reporting, document those controls thoroughly, test them comprehensively, and report on their effectiveness. Your bank might have hundreds of operational controls, but perhaps fifty of them are ICFR controls subject to SOX assessment. Your internal audit function must distinguish between these categories, focusing your most intensive testing efforts on controls that directly affect financial reporting.
Pro tip: When documenting controls for COSO and SOX compliance, connect each control explicitly to a specific financial reporting risk and specify the control’s preventive or detective purpose—this documentation discipline prevents confusion during external audits and ensures your control testing addresses actual financial reporting risks rather than generic best practices.
Obligations and Roles for Bank Auditors
Your role as a bank auditor carries weight that extends far beyond your organization. When you sign off on audit work, you are making statements that regulators, investors, depositors, and the public rely upon. The obligations placed on you are substantial, legally defined, and increasingly scrutinized. Auditors have the fundamental obligation to protect investors by conducting independent and objective audits. This obligation means you cannot simply accept management’s representations at face value. You must independently obtain reasonable assurance that financial statements are free of material misstatement, whether caused by error or fraud. You must issue clear audit reports that communicate your findings in language that stakeholders understand. You must communicate relevant findings to appropriate parties—whether that is management, your board’s audit committee, or banking regulators. In the banking context, these obligations intensify because banks handle other people’s money, and the stability of the financial system depends partly on the reliability of bank financial statements and the effectiveness of bank controls.
Your specific responsibilities as a bank auditor involve assessing internal controls over financial reporting and detecting fraud risks that could materially affect the bank’s financial position. You must evaluate whether management’s assessment of control effectiveness is reasonable based on your testing. You must examine whether controls are designed to prevent or detect material misstatements in significant transaction streams like loan origination, deposit processing, treasury operations, and financial consolidation. You must identify control deficiencies—situations where controls are not operating as designed—and communicate them to appropriate levels of management and your board. You must assess whether deficiencies represent significant deficiencies or material weaknesses. A significant deficiency is a control failure that could result in a misstatement that would be material but was not prevented or detected by other controls. A material weakness is a deficiency where it is reasonably possible that a material misstatement could occur and not be prevented or detected. The distinction matters because material weaknesses must be reported to your board and typically disclosed in your bank’s financial statements, whereas significant deficiencies are disclosed internally but may not require public disclosure depending on your bank’s status. Beyond financial reporting, the internal audit function in banks plays a crucial role in evaluating the effectiveness of internal controls and supporting sound corporate governance.
To fulfill these obligations effectively, you must maintain independence and secure adequate resources. Independence means you cannot report to the chief financial officer or the chief operating officer. You must report directly to your board’s audit committee or a similar governance structure where you have direct access to board-level oversight. This independence is not optional—it is a regulatory requirement and a best practice essential to your credibility. If management can pressure you to soften findings or delay reporting problems, your audit work loses its value. Adequate resources means your internal audit team must have sufficient headcount, skills, and technology to conduct meaningful testing. A single internal auditor attempting to assess controls across a mid-sized bank’s entire operation cannot possibly provide reasonable assurance of control effectiveness. Your audit committee should ensure your function receives budgeting appropriate to the complexity and risk profile of your organization. Your responsibilities also include assessing risk management and compliance systems. You must evaluate whether your bank’s risk appetite is clearly articulated, whether risk is assessed systematically, and whether compliance with laws and regulations is monitored effectively. You must foster communication with supervisory authorities to ensure transparency about control deficiencies and corrective actions your bank is implementing.
Key Obligations Summary
Your core obligations as a bank auditor include:
Conducting independent and objective assessments of internal controls over financial reporting
Obtaining reasonable assurance that financial statements and supporting records are materially accurate
Testing controls for operating effectiveness, not just evaluating their design
Identifying and classifying control deficiencies by severity
Communicating findings clearly and promptly to management and your audit committee
Maintaining auditor independence by reporting to the board rather than operational management
Assessing fraud risks and designing audit procedures to detect material misstatements
Evaluating management’s assessment of control effectiveness and determining whether it is reasonable
Ensuring adequate resources exist for your audit function to fulfill its responsibilities effectively
One critical aspect of your role that often gets overlooked is your obligation to maintain and update your professional knowledge. Banking regulations change. New risks emerge. Technology creates new control opportunities and new vulnerabilities. Your professional standards require you to keep current with auditing standards, accounting standards, and banking regulations. This is why continuing professional education is not optional—it is part of your responsibility to your profession and to those relying on your audit work.
Pro tip: Document your audit conclusions by clearly linking your testing procedures to specific internal control objectives and financial reporting risks—this documentation discipline demonstrates that you conducted a focused, risk-based audit rather than a generic checklist review, and it provides clear evidence supporting your conclusions to regulators.
Internal Control Risks and Common Pitfalls
Even well-intentioned banks with comprehensive control frameworks can stumble when they fail to recognize common vulnerabilities. Understanding these pitfalls is not academic exercise—it directly impacts your audit procedures, your recommendations to management, and ultimately your bank’s ability to prevent fraud and errors. Common internal control risks include ineffective oversight, insufficient segregation of duties, inadequate risk assessment, poor communication, and lack of ongoing monitoring. These are not obscure theoretical problems. They are the exact issues internal auditors encounter repeatedly across institutions of all sizes. Ineffective oversight happens when your board and senior management fail to actively monitor controls or when they rely too heavily on management representations without independent verification. Insufficient segregation of duties occurs when your bank has not actually implemented the preventive controls discussed earlier, allowing single individuals to authorize, record, and reconcile transactions. Inadequate risk assessment means your bank identifies risks at a surface level but fails to dig deeper into the actual likelihood and impact of those risks materializing. Poor communication means control information sits in databases that nobody reads, audit findings get lost in email, and frontline staff do not understand what controls they are supposed to execute. Lack of ongoing monitoring means your bank tests controls once during the annual audit cycle but never checks whether controls continue operating effectively during the other eleven months of the year.
The pitfalls arising from these fundamental weaknesses manifest in specific, recognizable ways. Unclear roles and responsibilities represent a common starting point for control failures. When your bank does not clearly document who is responsible for what control, multiple people assume someone else is performing it, or nobody performs it at all. A bank might have a written policy requiring loan supervisory approval, but if nobody explicitly documents that the loan portfolio manager owns this responsibility, approvals slip through gaps. Inconsistent application of controls happens when some loan officers follow approval procedures rigorously while others view them as optional suggestions. This inconsistency often reflects unclear expectations, inadequate training, or weak enforcement. Overreliance on manual processes creates control fragility, especially as your bank scales. A single person performing manual reconciliations can become a control bottleneck. That person may retire, take sick leave, or simply make errors at an increasing rate as transaction volumes grow. Banks that fail to automate critical controls eventually discover they cannot expand without violating their own control environment. Failure to adapt controls to changing operational environments represents another critical pitfall. Your bank might have effective controls for traditional branch banking that become obsolete when the bank launches a digital lending platform. Controls designed for a $500 million bank may not scale to a $5 billion bank. Regulatory changes can render existing controls irrelevant or inadequate. Your audit procedures must specifically assess whether controls have kept pace with your bank’s evolution.
This summary table highlights major internal control pitfalls and their impacts:
Pitfall | Typical Impact | Mitigation Strategy |
Unclear roles and responsibilities | Missed controls, confusion | Define ownership and duties |
Inconsistent process application | Gaps in compliance, risk rises | Standardize training and oversight |
Overreliance on manual tasks | Errors, scalability limitations | Automate critical control steps |
Failure to adapt to change | Outdated controls, new risks | Regularly review and update controls |
The Balance Between Prevention and Detection
One of the most common pitfalls stems from incorrect balance between preventive and detective controls. Some banks become so focused on detective controls that they accept a high volume of errors and then catch them through reconciliation. This approach is operationally expensive, creates customer service problems, and leaves your bank vulnerable to fraud that detective controls fail to catch. Other banks implement so many preventive controls that they create operational friction, slowing down legitimate business and frustrating employees. Frequent pitfalls involve inadequate risk management integration, weak enforcement of policies, and lack of transparency. Your bank’s control framework must integrate risk management into operational decisions, not treat risk as something compliance handles separately. When risk management and line management operate in silos, controls become disconnected from actual business objectives. Weak enforcement happens when your bank establishes clear policies but does not consistently hold people accountable for violations. If loan officers know that exceeding their approval authority carries no real consequences, they will exceed it. Lack of transparency means control information and audit findings do not flow to decision-makers. Your board cannot allocate resources effectively to address control weaknesses if those weaknesses are not clearly communicated. Your management team cannot prioritize remediation if they do not understand the severity and scope of control deficiencies.
Specific Banking Environment Challenges
Banking presents unique control challenges beyond those faced by other industries. Technology reliance and cyber risks mean your controls are only as strong as the systems implementing them. If your deposit processing system has unauthorized access vulnerabilities, your segregation of duties controls become meaningless. Loan portfolio concentration creates risk where your bank might have excellent controls over individual loan underwriting but inadequate controls over aggregate loan exposure to single industries or borrowers. Third party and vendor management becomes critical as banks outsource functions to service providers. If your bank outsources loan servicing, who is responsible for reconciling loan balances? Who ensures that loan payment processing controls operate effectively at the vendor location? Regulatory compliance complexity means your bank must maintain controls addressing dozens of different regulatory frameworks simultaneously. Your anti money laundering controls, Bank Secrecy Act controls, fair lending controls, and capital adequacy controls all operate in parallel, sometimes creating conflicting requirements that your control system must navigate. These banking specific challenges require audit teams with deep knowledge of banking operations and regulatory requirements.
Pro tip: When assessing control risks in your audit work, specifically test for inconsistent application of controls across multiple locations or loan officers rather than assuming controls operate uniformly—you will frequently discover that well-designed controls fail because execution varies substantially across your organization.
Strengthen Your Bank’s Internal Control with Expert Training
Understanding the critical role of internal control in banking is just the first step toward safeguarding your institution against errors, fraud, and compliance risks. This article highlights common challenges such as ineffective oversight, insufficient segregation of duties, and inconsistent application of controls that can compromise your bank’s control environment and regulatory compliance. Professionals like you, responsible for internal audit, compliance, and risk management, need practical tools and knowledge to design, implement, and evaluate control systems aligned with frameworks like COSO and SOX.
Take the next step to master these challenges through specialized courses and seminars at Compliance Seminars. Our comprehensive programs deliver Continuing Professional Education credits tailored for CPAs, CIAs, CISAs, and CFEs. With expert-led training on internal controls, risk assessment, fraud prevention, and regulatory compliance, you will gain the skills and confidence to enhance your bank’s control system and meet audit expectations effectively. Visit our landing page to explore live webinars, in-person workshops, and customizable corporate training solutions designed for banking professionals committed to operational excellence. Start improving your internal control knowledge today and protect your organization’s financial integrity.
Frequently Asked Questions
What is internal control in banking?
Internal control in banking is a comprehensive system of processes, procedures, and oversight mechanisms designed to ensure a bank operates safely, achieves its financial objectives, and maintains accurate reporting. It provides reasonable assurance that the institution will meet its strategic goals and comply with applicable laws.
What are the key components of an effective internal control system in banking?
An effective internal control system comprises five essential components: the control environment, risk assessment, control activities, information and communication, and monitoring activities. These components work together to mitigate risks and support organizational objectives.
What is the difference between preventive and detective controls in banking?
Preventive controls are designed to stop problems before they occur, such as segregation of duties and authorization procedures. Detective controls identify issues after they happen, such as reconciliation processes and transaction reviews. Both types are essential for a complete control system.
How do internal control systems operate within a bank?
Internal control systems operate continuously across a bank, involving formal policies and procedures that safeguard assets, ensure accurate accounting, and promote operational efficiency. They assess risks, implement controls, and monitor their effectiveness regularly to adapt to changing circumstances.
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