What is the purpose of establishing internal controls?

The purpose of establishing internal controls is fundamentally about ensuring the protection of an organization’s resources and maintaining compliance with applicable laws and regulations. Internal controls are designed to safeguard assets from loss, fraud, and unauthorized use, which is crucial for maintaining the integrity of financial reporting and operational efficiency.

By implementing these controls, a company can create an environment that promotes reliable financial reporting, adheres to operational efficiency, ensures compliance with laws and regulations, and reduces the risk of errors and fraud. This is essential for sustaining the organization's reputation and financial health.

The other choices, while they may seem relevant, do not accurately capture the primary aim of internal controls. Facilitating external market expansion is more about strategic planning and marketing; maximizing shareholder returns relates to financial performance management; and enabling employee autonomy focuses on workforce management and empowerment rather than on the systematic financial oversight and protection that internal controls provide.