A type of internal control mechanism intended to find problems within a company's processes. Detective control may be employed in accordance with many different goals, such as quality control, fraud prevention and legal compliance.
In small firms, internal controls can often be implemented simply through management supervision. At large firms, however, a more elaborate system of internal audits and other formalized safeguards is often required to adequately control the company's operations.
The presence of adequate internal controls is important to investors as an assurance that financial and other disclosures are accurate, and that they are not being defrauded by managers or employees. In the U.S., the Sarbanes-Oxley Act of 2002 imposes a variety of legal requirements on public companies which are designed to ensure that firms have adequate controls in place. The Act requires offers to certify that they have systems of internal control in place, and that they regularly evaluate the effectiveness of the controls. External auditors are also required to evaluate the effectiveness of internal controls over financial reporting.