During the system analysis and system design stage, it is crucial to incorporate certain basic internal controls which are as follows:
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SEGREGATION OF DUTIES:
Staff responsibilities must be organised to ensure that key tasks are segregated to reduce the possibility of error, fraud or the manipulation of accounting or other records. Specific responsibilities to separate are custody, authorisation and approval, recording and execution of a specific transaction. |
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PHYSICAL ACCESS CONTROLS:
Only authorised personnel should have access to the records and assets of an organisation. A comprehensive recording system will need to be established to maintain an audit trail of the location, custody and ownership of assets. In addition, access to and use of assets need to be carefully controlled. |
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AUTHORISATION AND APPROVAL CONTROLS:
All transactions should require authorisation or approval by an appropriate responsible person. Authorisation procedures should be estabilshed to incorporate authorisation limits and the means by which approval is to be given.
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MANAGEMENT CONTROL:
Directors must ensure that the control system is actually operated and adhered to. Periodic review of the adequacy of systems must be undertaken to test adherence to pre-agreed standards. This may take the form of an internal audit function.
It is important that management constantly reinforce the development and communication of ethical values and the importance of control issues throughout the organisation.
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SUPERVISION AND PERIODIC RECONCILIATION
All staff members need to be aware that their work may be checked. Knowledge of this should help to reduce the risk of error, falsification or fraud, The system should be designed to ensure periodic reconciliation in all aspects of the business. Ideally reconciliation should be completed by someone who is independent of the recording and execution of the specific task |
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ARITHMETICAL AND ACCOUNTING CONTROLS:
Systems should be in place to ensure that transactions are accurately recorded. Management must ensure that techniques such as batch control totals on inputs, reconciliations, variance analysis and analytical review are used to try to ensure completeness and accuracy of records. |
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PERSONNEL:
The quality of any system will be a function of the competence and integrity of those who are responsible for operating the system. The recruitment, training and adequate remuneration of appropriately qualified and experienced staff is vital.
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