Internal Control System

Topics: Auditing, Audit, Internal audit Pages: 5 (1250 words) Published: May 28, 2013
Lecture note on monitoring business and accounting systems.
internal control systems and internal controls
An internal control system is the whole system of controls, financial and otherwise, established by the management in order to * Carry on the business of the enterprise in an orderly and efficient manner, * Ensure adherence to management policies,

* Safeguard the assets and secure as far as possible the completeness and accuracy of the records. * Ensure that the enterprise maintains complete and accurate records. Types of internal control

 is based on * Operational efficiency
* Adherence to management policies.
These controls will emphasise statistical analysis performance reports, quality control, employee training programmes and so on. is based on * Safeguarding of assets,
* The reliability of financial records.
These controls include systems of authorisation and approval, separation of duties concerned with asset custody, physical controls over assets and internal auditing. Eight types of control
egregation of duties: Separation of responsibilities so that no one person can fully record and process a transaction. Segregation of duties reduces the risk of intentional manipulation or error and increases the element of checking.

hysical control requires access to assets is limited to authorised personnel. Such control include locks, safe and entry codes.

uthorisation and approval: All transactions should be authorised or approved by an appropriate responsible person. The limits for these authorisations should be specified. M
anagement controls are exercised by management outside the day to day routine of the system. Overall supervisory control
Review of management accounts and comparison within budgets
Internal audit function
Special review procedure
upervisory control: Any system of internal control should include the supervision by responsible officials of day to day transactions and recording thereof.


rganisation as a control: The delegation of authority and responsibility should be clearly specified along with identifying the lines of reporting for all aspects of the enterprise’s operations, including the controls.

rithmetical and accounting control: All transactions should be recorded correctly and should be processed accurately through correct authorised persons.

ersonnel controls: Personnel should have appropriate skills to perform their responsibilities. Personnel’s qualifications, selection and training should have control with proper guidance.

Internal control systems
A range of internal controls is internal control system.

A company will select internal controls from the SPAM SOAP. Which control it selects depends on the particular circumstances of the company.

Internal check
Internal check is regarded as those checks on the day to day transaction that operate continuously as part of the routine system, whereby the work of one person is proved independently of or is complementary to, the work of another.

Arithmetical internal checks include pre-lists, post-lists and control totals. Pre-list is a list that is drawn up before any processing takes place. Post-list is a list that is drawn up during or after processing Control total is a total of any sort used for control purposes by comparing it with another total that ought to be the same. -------------------------------------------------

Aims of internal checks
* Segregation of tasks so that for particular action particular person can be responsible. * Create and preserve the records that act as confirmation of physical facts and accounting entries. * Break down routine procedures into steps or stages for continuous flow of work and avoidance of bottleneck * Reduce possibility of fraud and error as that focus prevention of error before the reality....
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