Why are financial controls critical for a business?

Financial controls are essential for a business primarily because they ensure accurate reporting and protect against fraud. This function is critical as financial controls encompass the processes, policies, and procedures put in place to monitor financial transactions, safeguard assets, and ensure the integrity of financial reporting. By implementing robust financial controls, businesses can identify discrepancies, mitigate the risk of fraud, and provide stakeholders (such as investors, creditors, and management) with reliable financial information necessary for decision-making.

Accurate financial reporting is vital for maintaining the trust of stakeholders and complying with legal and regulatory requirements. Furthermore, the protection against fraudulent activities not only safeguards the company's assets but also reinforces internal accountability and transparency. This can lead to better financial performance and improved reputation, which are integral to the long-term success of the business.