What is the primary role of internal controls in finance?

The primary role of internal controls in finance is to safeguard assets and prevent fraud. Internal controls are policies and procedures established by an organization to ensure the integrity of its financial and accounting information, promote accountability, and prevent fraud. By implementing strong internal controls, organizations can protect their financial resources against theft, loss, or misappropriation, ensuring that all transactions are recorded accurately and in accordance with established guidelines. This protection extends to physical assets, cash handling, and safeguarding sensitive information, making it crucial for the overall financial health and operational efficacy of the organization.

While improving employee performance, increasing sales and revenue, and investing in long-term assets are important aspects of a business, they are not the primary focus of internal controls. Internal controls specifically target risk management, ensuring that the organization's resources are secure and accurately managed.