Explain the meaning of internal control and internal audit and also mention how these two are different from each other.

Meaning of Internal Control: The term internal control is defined as a system or plan of accounting and financial organization within a business comprising all the methods and measures necessary for safeguarding its assets, checking the accuracy of its accounting data or otherwise substantiating its financial statements, and policing previously adopted rules, procedures and policies as to compliance and effectiveness. Internal control is not necessarily a control over finance only. Its scope is wider as it covers the control of the whole management system. Meaning of Internal Audit: Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. The scope of internal auditing is broad. It may involve topics such as an organisation's governance, risk management and management controls over efficiency of operations, reliability of financial and management reporting and compliance with laws and regulations. Differences between Internal Control and Internal Audit: Basis Internal Control Internal Audit Meaning Internal Control means the process designed, implemented and maintained by those charged with governance, management and other personnel to provide reasonable assurance about the achievement of an entity's objectives with regard to reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable laws and regulations. Internal auditing means an audit on behalf of management to ensure the adequacy and effectiveness of internal controls, accuracy and timeliness of financial and other records and reports and adherence to the laid down policies and procedures by each unit of the organization. Verification It is a self-balancing mechanism implemented by the management, so as to ensure that the entire work process is divisible in parts, so that not a single person may have the access to complete the entire process. The entire work process / system is checked and reviewed by the internal auditor. Reporting It is a mechanism introduced by the management. Internal auditor submit its report to the management. What it is? It is a system introduced by the management. It is an activity done by the internal auditor. When it is done? Internal Control is a policy decision by the management and is a continuous process. Its periodicity may be yearly or half yearly or quarterly, as decided by the management. Purpose Formulation and circulation of management principles and policies and effective and speedy execution thereof with the help of internal checking and internal audit activities. Detecting and reporting errors and frauds and irregularities regarding assets committed, if any detection and prevention activity. Scope Wider in scope than internal audit. Limited to a continuous internal system of checking financial and non-financial operations and reporting to internal top management.