What is Detective Control
Detective control is an accounting term that refers to a type of internal control 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. One example of a detective control is a physical inventory count, which can be used to detect when actual inventories do not match those in accounting records.
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.
BREAKING DOWN Detective Control
Detective controls are just one of many types of accounting controls. Accounting controls of all types are designed to help companies comply with accounting rules and regulations. In contrast to detective controls are preventive controls. While detective controls may uncover losses after they occur, preventive controls are designed to keep them from occurring.
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 that are designed to ensure that firms have adequate controls in place. The Act requires company officers 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.