Definition: is a set of specific steps and actions that are taken before a problem occurs in order to prevent it or to at least minimize its impact. Preventive controls are usually incorporated into the process of business operation, therefore they are typically executed on a continual basis. Preventive controls are among the most effective and efficient internal control methods since they oftentimes help prevent an issue from occurring and are not always expensive to implement. Preventive controls may include such actions as performing the employees’ background checks, dividing the responsibilities among separate employees (also called the segregation of duties), implementing supervision-required activities, etc.
In a Sentence:
I only order the inventory, but James accepts it. This is the part of the preventive controls system.
Since we are implementing the preventive controls, separate employees handle approving and signing checks for the payroll.
One of the new preventive controls is the need to authorize all the payments with Mr. Lee.
Synonyms and related words: preventive policies, internal controls, preventive care, financial controls, regulatory controls, corrective controls, detective controls, segregation of duties