What is the role of internal controls in the risk assessment process?

Internal controls play a critical role in the risk assessment process by providing a framework that helps organizations identify, assess, and manage risks. Their primary purpose is to mitigate risks that could hinder the achievement of organizational objectives, particularly regarding the accuracy and integrity of financial reporting. By establishing a set of procedures and policies, internal controls ensure that financial data is reliable, safeguarding against inaccuracies, fraud, and errors. This strengthens the overall governance framework of the organization and supports compliance with relevant laws and regulations.

While redefining organizational goals, increasing financial returns, and managing stakeholder expectations are important aspects of broader organizational strategy, they do not directly relate to the specific function of internal controls in the risk assessment process. Internal controls specifically focus on the reliability of financial reporting processes and the mitigation of risks inherent to these processes, making them essential for effective risk management.