What are internal controls designed to prevent?

Internal controls are systems and procedures implemented by an organization to ensure the integrity of financial and accounting information, promote accountability and prevent fraud. They are specifically designed to mitigate risks such as fraud, shrinkage, and wastage.

Fraud can occur when there are weaknesses in a company's processes, allowing employees or outsiders to steal assets or manipulate financial data. Internal controls help to address this risk by implementing checks and balances, such as segregation of duties, approval processes, and audits. Shrinkage typically refers to inventory that is lost due to theft, errors, or mismanagement, and strong internal controls can help reduce this loss by tracking inventory more accurately and enhancing security measures. Wastage often involves the unnecessary use of resources, and controls can ensure that processes are efficient and that resources are utilized appropriately.

The other aspects mentioned, like market expansion, employee turnover, and product innovation, are not typically addressed directly by internal controls. Instead, these factors focus on strategic business decisions and human resource challenges rather than the financial oversight and operational accuracy that internal controls are designed to enhance. Hence, the correct answer is centered around the protective functions of internal controls against financial mismanagement and losses.