Internal Controls vs. Assurance Services: How They Work Together to Protect Your Business

When it comes to managing financial risk and ensuring the accuracy of your financial reporting, two powerful tools work hand-in-hand: internal controls and assurance services.

Many business owners are familiar with the concept of internal controls—things like requiring two signatures on checks or performing monthly reconciliations. But fewer understand how those controls relate to assurance services like audits, reviews, and compilations provided by firms like Lang, Faylor & Chomo.

In this post, we’ll explore the difference between the two, how they complement each other, and why both are essential for financial integrity, stakeholder trust, and long-term business health.

What Are Internal Controls?

Internal controls are the policies, procedures, and practices a business implements to:

• Safeguard assets

• Prevent and detect errors or fraud

• Ensure reliable financial reporting

• Promote compliance with laws and regulations

Examples include:

• Segregation of duties (e.g., the person who writes checks isn’t the one reconciling the bank account)

• Physical security for inventory

• Automated system access controls

• Regular review and approval of financial reports

Well-designed internal controls help a business function efficiently and reduce the risk of costly mistakes or fraud.

What Are Assurance Services?

Assurance services are independent evaluations of a company’s financial information, typically performed by a CPA firm. These include:

• Audits – The highest level of assurance, involving extensive verification and testing

• Reviews – Moderate assurance through inquiry and analytical procedures

• Compilations – No assurance, but useful for organizing financial data into formal statements

At Lang, Faylor & Chomo, we provide all three levels of assurance to help businesses, nonprofits, and government entities meet stakeholder expectations and regulatory requirements.

How Internal Controls and Assurance Services Work Together

While internal controls are implemented by the business, assurance services are performed by an independent third party to assess and validate the effectiveness of those controls—and the financial data they protect.

Here’s how the relationship works:

Internal Controls	Assurance Services
Prevent or detect errors before they impact financial statements	Detect misstatements after they occur and assess control effectiveness
Operate continuously throughout the year	Occur periodically (e.g., annually)
Created and enforced internally	Performed by external professionals
Help ensure financial data is accurate	Provide external validation of financial data accuracy

In other words: internal controls are your first line of defense; assurance services are your second set of eyes.

Why You Need Both

Many organizations mistakenly believe that one can replace the other. But in reality:

• Strong internal controls can reduce audit risk, making assurance engagements smoother and less costly.

• Regular assurance services can uncover weaknesses in your internal controls and suggest improvements.

Together, they form a robust financial governance strategy that helps:

• Build trust with investors, lenders, and boards

• Comply with industry regulations or funding requirements

• Prevent financial misstatements, fraud, or costly errors

Example: A Real-World Scenario

Imagine a nonprofit that receives $1 million in government grants annually. They have a bookkeeper who manages all payments and bank reconciliations.

Without internal controls:

• That bookkeeper could process unauthorized payments unnoticed.

• Errors in financial statements might go undetected.

With strong internal controls:

• A second person reviews and approves all disbursements.

• Monthly reports are reviewed by the board’s finance committee.

Then, with an annual audit from a firm like LFC:

• Auditors can independently verify that transactions match supporting documentation.

• They may identify risks or inefficiencies in the existing control process.

How LFC Can Help

At Lang, Faylor & Chomo, we don’t just perform audits and reviews—we work alongside your team to strengthen your financial reporting systems. Our assurance services often include feedback on internal control design and effectiveness, even for clients who don’t require a formal audit.

We help you:

• Understand your current control environment

• Identify risks and gaps in financial oversight

• Comply with reporting standards and grant requirements

• Provide stakeholders with the confidence they demand

Ready to Strengthen Your Financial Oversight?

Whether you’re a growing business, a nonprofit with audit requirements, or a government entity that needs reliable financial reporting, we’re here to help.

Contact Lang, Faylor & Chomo today to learn how our assurance services can complement your internal controls—and build a more resilient financial future.