The Procurement Glossary » Internal Controls

Internal Controls

Compliance & Risk

Definition

The policies, procedures and system checks that safeguard assets, ensure accurate records and prevent fraud.

Explanation

In procurement, controls include segregation of duties, approval limits, three-way matching and vendor-master governance. They deter and detect error and fraud, and are a focus of internal and external audit.

Example

Segregation of duties and matching controls stop one person from raising, approving and paying an order.

Related terms

• Segregation of Duties (SoD) — A control principle that splits critical steps among different people so no one individual controls a whole transaction.
• Audit Trail — A complete, time-stamped record of the steps and approvals in a transaction, showing who did what and when.
• Three-Way Matching — An invoice-control check comparing the purchase order, the goods-receipt record and the supplier invoice before payment.
• Procurement Fraud — Dishonest activity to gain improperly from the buying process — such as kickbacks, phantom vendors or invoice fraud.

Frequently Asked Questions

What is Internal Controls?

The policies, procedures and system checks that safeguard assets, ensure accurate records and prevent fraud. In procurement, controls include segregation of duties, approval limits, three-way matching and vendor-master governance. They deter and detect error and fraud, and are a focus of internal and external audit.

Can you give an example of Internal Controls?

Segregation of duties and matching controls stop one person from raising, approving and paying an order.

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