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Internal Check

The document discusses internal checks in organizations. It defines internal check as a system where the recording of business transactions is arranged so that one staff member's work is automatically checked by others. Key elements are continuous checks on day-to-day transactions, dividing work among complementary staff tasks, and no single staff controlling all aspects of transactions or having sole access to assets. The principles of a good internal check system are discussed as well as the basic principles of establishing an effective internal audit department.

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aamritaa
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2K views

Internal Check

The document discusses internal checks in organizations. It defines internal check as a system where the recording of business transactions is arranged so that one staff member's work is automatically checked by others. Key elements are continuous checks on day-to-day transactions, dividing work among complementary staff tasks, and no single staff controlling all aspects of transactions or having sole access to assets. The principles of a good internal check system are discussed as well as the basic principles of establishing an effective internal audit department.

Uploaded by

aamritaa
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Internal check

Learning outcome
Identifying the internal check process operational in an organisation

Internal check

Internal check is a system enforced in business under which the recording of business transactions is arranged in such a manner that the work of one staff member will automatically be checked by others in the course of recording of transaction itself.

Essential elements of internal check


Existence of checks on day to day transactions. The check is to be carried out continuously as a part of the routine system. The work is divided among the staff and each staff is assigned a specific task. The work of each staff though independent is complementary to the work of another.

Essentials of good internal check system


No single staff shall have absolute control over recording of all the aspects of business transactions by himself. The same staff shall not be allowed to have access to all books of accounts as well as physical custody of the assets. Each member of the staff should be made responsible for a specific work. All officials and employees holding

The basic principal of establishing internal audit in a business concern are1. Independence : the internal audit department should have an independent status in the organization. He may be required to report directly to the board of directors. 2. Objectives: the objectives of the internal audit function should be made very clear and unambiguous. The objectives should be properly communicated . 3. Clarity in Scope: the scope Of internal audit department must be specified in a comprehensive manner. The department must at all times, have authority to investigated from the financial angle, every phase of organizational activity under any circumstances.


4. Definition of Duties: The internal audit Departments duty is to review operations as part of the internal control system. 5. The cost of internal audit department should not exceed the benefits expected to be derived from it.

6. Reporting: The Programme of internal audit should be time-bound.


7. Follow Up and Review: Top management should take active part in ensuring compliance with actions points raised in the report. 8. Relationship with statutory auditor: The copy of the internal audit report should be made available to the statutory Auditor, who can deal with the same in the manner as he deems fit.

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