Internal Check As Part Of Internal Control System And Features/Framework Of An Effective Internal Check System

• The check on day to day transactions which operates continuously as part of the routine system whereby the work of one person is proved independently or complementary to the work of another.
• Is a part of the overall internal control system
• The check and balance in the staff organization and job allocation aspects

Purpose Of Internal Check

• The purpose of internal check is the prevention or earlier detection of fraud or error (whether intentional or unintentional)

Internal Check In The Accounting System

• In the accounting system, internal check involves the check-and-balance on the organization of system of bookkeeping and arrangement of staff in such a manner that no one person can completely carry through a transaction and record every aspect thereof.

1.0 No single person should have an independent control over any important aspect of the business. His or her dealings/work should in the ordinary course come under the review of another

2.0 The duties of members of the staff should be changed from time to time without any previous notice

3.0 Every member of the staff should be encouraged to go on leave at least once in a year.

4.0 Persons having physical custody of assets must not be permitted to have access to the books of accounts

5.0 Accounting control should be imposed for each important class of assets and periodic inspection should be conducted to verify its physical condition/existence

6.0 Automatic cash register should be deploy to prevent loss or misappropriation of cash

7.0 Budgetary control should be established and variance analysis to be conducted, investigated and quick actions being taken

8.0 Physical counts like stock-count need to be conducted by personnel independent of the warehouse and physical cash count (petty cash count based on imprest cash float system) should be periodically conducted

9.0 The financial and administrative powers should be distributed very judiciously amongst different officers and the manner in which these are actually exercised should be reviewed periodically

10.0 Procedures should be laid down for periodical verification/reconciliation and testing of different sections of accounting records to ensure that they are accurate

11.0 Accounting procedures should be reviewed periodically to ensure the continuous effectiveness of the existing procedures.Salient points:

• Effective internal check can be done in medium to large size organization.
• For those sole-proprietorship or small concern, the accounting work is often done by one person who has both the operating and custodial responsibilities which render internal check ineffective.
• In such circumstances where segregation of duties is limited or evidence of supervisory controls is lacking, the evidence necessary to support the auditor’s opinion on the financial information may be through the substantive procedures.