Jain University B.Com. VI sem

1. Internal control, Internal check and
Internal Audit
Lalatendu Mishra

2. Internal Control System
●
It includes control policies and procedures,
which emanate from Board of Directors
/Management
●
Performing functions effectively

3. Objectives of Internal Control
System
●
Adherence to policies and procedure
●
Safeguarding of assets
●
Prevention and Detection of fraud and errors
●
Accuracy and completeness
●
Timely preparation of reliable financial
information

4. Inherent limitations of internal
control
●
Benefit expected from a control may not
commensurate with cost of implementation
●
Potential of human error
●
Possibility of collusion
●
Possibility that a person responsible or
exercising control could abuse the authority
●
Manipulation by management

5. Components of Internal Control
System
●
Accounting Control
●
Control Environment
●
Control Procedure
●
Supervision

6. Advantages of Internal control
●
Accurate and reliable data
●
It ensures that the policies and procedures
prescribed by the management are followed
by the employees
●
It promotes operational efficiency
●
It helps the organization to attain its goal
effectively
●
It safeguards the assets and the records of the
business

7. Internal Check
- Part of internal control
-It is the built-in-check in accounting process
itself
-arrangement or system : the work of one person
is automatically checked by another

8. Objectives of Internal Control
●
Fixing up responsibility
●
Work of one is automatically checked by other
●
Workload distribution, rotation in duties and
break in monotony
●
Each aspect is recorded by different person :
minimizing and preventing error

9. Advantages of internal check
●
Fixation of responsibility
●
Increase efficiency of clerks
●
Prevention of errors and frauds
●
Reliability of information
●
Reduces the workload of auditor
●
Increases the profitability of the business

10. Internal control and Internal check
Scope The whole
system of
control
System of
allocating
duties
To prevent
fraud and
error, fixing
responsibility
etc
To achieve
objective
Objective

11. Internal control and Internal check
Flexibility Reviewed
occasionally
Stable for
certain
period: less
flexible

12. Internal Audit
i)An important element of internal control system
ii)An independent management function
iii)Continuous and critical appraisal of the
function of the entity

13. Objective Internal Audit
●
To determine and report on appropriateness of
internal control: safeguarding and detecting
fraud and error
●
To review compliance with policies, plans,
procedures, laws and regulations
●
To review management information system:

14. Objective Internal Audit
-To review the organization structure: authority
and responsibility, span of control, unity of
command, flow of information
-To appraise the economy and efficiency with
which resources are employed
-To review accomplishment of goals and
objectives: standard, deviation and
underestimation

15. Internal Audit and Internal Check
Meaning Independent
review of
operation and
records
An
arrangement
of duties:
automatically
check
Prevent fraudDetect fraudObject

16. Internal Audit and Internal Check
Staff
requirement
Staff specially
assigned
No special staff
simultaneousA postmortemTiming

17. Internal Audit and Internal Check
Submission of
report
To
management
To the
departmental
head every
day

18. Internal Check for Credit Sales
i) Accepting customer order
ii)Credit approval
Iii) Issue of merchandise
iv)Despatch of goods
v)Billing customer
vi)Recording the sales invoice and sending
statements to customers
vii)Granting of write offs and credits

19. Internal Check for Credit Sales
Function: Credit
approval
Department/ Unit:
Credit
Documents or records:
stamping approval,
customer credit file
Related Activities:
Credit worthiness,
credit limit, reference
from

20. Internal Check for Credit Sales
Function: issue of
merchandise
Department/unit:
warehouse or
production
department's
warehouse
Documents or records:
Sales order ( for
stamping the issue of
goods)
Related Activities :issue
goods to despatch
department

21. Internal Check for Credit Sales
Function: Despatch of
goods
Department/unit:
Despatch
Documents or records:
Goods outwards notes;
acknowledgment
issued by transport
Related Activities :
Packaging of goods
and arranges
transportation for
despatch

22. Internal Check for Credit Sales
Function: billing
customer
Department/ unit:
despatch
Documents or records:
sales journal
summary sales report
Related Activities :
Billing or billing unit of
finance department

23. Internal Check for Credit Sales
Function: Recording
the sales invoice and
sending statements
to customer
Department/unit:
finance department
Documents or records:
Cash receipts monthly
statement
Related Activities :
Records sales,invoice
against debtor;record
payments and sends
statements to
customer

24. Internal Check for Credit Sales
Function: Granting of
write offs and credits
Department/unit:
depending
circumstances
Documents or records:
Goods return notes;
write off authorisation
Related Activities : to
write off receivables
and approval of credit
notes

25. Internal Check with regard to
payment of wages and salaries
1- Personnel hiring
2-Time-keeping
3-Preparing the payroll
4-Distribution of wages and salaries
5-Preparation of returns

26. Internal Check with regard to
payment of wages and salaries
Function: Personnel
hiring
Department/unit:
Personnel
Documents or records:
personnel files
Related Activities :
Hiring, transfer,
terminates the
employees and
maintains personnel
records

27. Internal Check with regard to
payment of wages and salaries
Function: Time keeping Department/unit :
Production
Documents or records:
Time report
Related Activities :
Number of hour, time
clock, time report by
the supervisor

28. Internal Check with regard to
payment of wages and salaries
Function: Preparing
payroll
Department/unit:
Payroll
Documents or records:
Wage sheet, cheques,
salary statements,
distribution,
scheduled wages and
salary records
Related Activities
:salary statement and
wage sheet

29. Internal Check with regard to
payment of wages and salaries
Function: distribution of
wages and salaries
Department/unit:
Any person who has no
role in pay roll
Documents or records:
Authorization letters
Related Activities :
Temporary and regular
worker, maintaining
wage and salary
record

30. Internal Check with regard to
payment of wages and salaries
Function: Preparation
of Return
Department/unit:
Payroll or finance
Documents or records:
Form 16A; provident
fund statements etc.
Related Activities :
preparation of
statement of income
statement of income
tax

31. Inventory
- located at a convenient place
-Goods received Note: triplicate( purchase,
accounts, stores)
-storing in the allotted racks
-bin cards
-stock taking: bin card and stock ledger
-gate pass to the authorized person
-issue against requisitions
-Material returned note