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The document discusses internal control and internal audit. It defines internal control as a process to ensure achievement of organizational objectives related to operational efficiency, reliable financial reporting, and compliance with laws and regulations. It describes the objectives of internal control as efficiently carrying out transactions, optimizing resource use, safeguarding assets, producing accurate information, and preventing/detecting errors and fraud. The document then discusses internal check and internal audit. It defines internal check as an arrangement of duties to automatically check each other's work. It provides examples of internal check for cash, wages, purchases, and sales. Internal audit is defined as an independent review of operations and records to verify accuracy and detect errors and frauds. Key differences between internal check and internal
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- 2. MEANING OF INTERNAL CONTROL It is a process for assuring achievement of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting and compliance with laws, regulations and policies.
- 6. OBJECTIVES Transactions are carried efficiently and effectively Optimize use of Company Resources Safeguard company's assets produce accurate information to carry out operations Prevent and detecting error and fraud To prevent misappropriation
- 7. To allocate the duties and responsibility To ensure the accurate record of all business transaction To exercise moral influence over the staff members To prepare final accounts with an ease and efficiency
- 8. SCOPE OF INTERNAL CONTROL A. Capital Controls : 1. General financial control 2. Cash Control 3. Control over trading transaction 4. Capital expenditure control B. Administrative Controls : 1. Control over employees 2. Maintenance of Staff relationship
- 10. INTERNAL CHECK
- 11. MEANING It is an arrangement of duties of members of staff in such a way that the work performed by one person is automatically and independently check by others
- 13. PRINCIPLES Responsibilities Record Keeping Insurance and Bonding(loss of asset) Technological Controls Rotation of Employees Supervision
- 16. DISADVANTAGES OF INTERNAL CHECK Decreased in Quality of Work Complacency Costly for the Small Business Create Confusion Chance of Collusions
- 17. INTERNAL CHECK AS REGARDS CASH Duties in respect of cash should be divided in a such a manner that there is automatic check on the various functionaries connected with cash section
- 18. 1. The cashier should not have access to the incoming mail books and the ledgers 2. Remittance should be opened by the cashier in the presence of a responsible person 3. All the receipts of cash should be deposited in the bank at the end of the say or by next morning 4. On receiving cash, it should be acknowledged by issuing a printed receipt. 5. Cash registers should be used 6. Bank reconciliation statement should be made by cashier and someone else frequently
- 19. INTERNAL CHECK AS REGARDS WAGES Internal check regards wages much counteract the following dangers : a. Inadequate time record b. Inadequate piece work record c. Errors in presentation of wages sheet d. Manipulation of wage sheet by inserting dummies
- 20. Payment done according to the time 1.TIME RECORDS
- 22. 2.PIECE WORK RECORD Piece work (or piecework) is any type of employment in which a worker is paid a fixed piece rate for each unit produced or action performed regardless of time.
- 24. 3.WAGE – SHEET wage sheet is a consolidated list of workers, which shows the gross deductions and net wages payable to them.
- 25. PREPARATION OF WAGE SHEET
- 26. CONTINUE….. 4.Overtime record 5. Pass-out record
- 27. INTERNAL CHECK REGARDING PURCHASE All the orders for purchase should be recorded in Purchase order books On receipt of goods the gate keeper or store keeper should make a record in the Goods Inwards Books Quality and quantity should be checked by the checking departments Each placing , the invoice should be sent to the concerned department for checking Entry for all the goods purchased should be made by an independent person in the stores ledger
- 28. INTERNAL CHECK AS REGARDS SALES All orders received should be properly and in writing All goods supplied should be recorded in the Goods Outward book Invoice should be prepared in duplicate- one copy sent to the customer and other carbon copy should be kept . Entries should be made in the Sales Book on the basis of Invoice Goods returned by the customer should be entered.
- 30. MEANING It is the review of operations and records undertaken within a business by specially assigned staff on a continuous basis
- 31. OBJECTIVES To verify the correctness of Financial Accounting presented to the Management To comment on the effectives of the internal control system To facilitate the early detection and prevention of the errors and frauds To ensure that the standard accounting policies are followed by the organization To examine the protection provided to assets and uses to which they are put To undertake the special investigation to the management To verify the correctness of the financial accounting records To ensure that the acquisition and disposal of assets under proper authority
- 32. INTERNAL CHECK V/S INTERNAL AUDIT Internal Check Internal Audit 1. Internal Check is an arrangement of duties allocated in such a way that the work of one person is automatically checked by another. 1.Internal Audit is an independent appraisal of the operations and records of the company. 2. The purpose of Internal Check is to prevent or minimize he possibilities of errors, frauds or irregularities. The purpose of Internal Audit is to detect the errors and frauds which have already been committed. 3. A large number of employees are needed for the implementation of Internal Check System. 3. much smaller number of persons are needed for implementing Internal Audit implementation.
- 33. 4.No new appointment is made. It, in fact represents only the arrangement of duties of the staff in a particular way. 4. For carrying out Internal Audit, a separate staff of employees is engaged for the purpose. 5. Internal Check is an operation during the course of transaction. 5. Internal Audit starts when the accounting process of different transactions is finished. 6. Internal check is a device for doing the work. 6. It is a device for checking the work 7. Internal Check the Errors and Frauds are discovered during the course of work. 7. Internal Audit Errors and Frauds are detected after the completion of work 8. The scope of Internal Check is very limited 8. The scope of Internal Audit is comparatively board.