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C. P. Mansoor Ahmed M. Com PGDBA
INTERNAL CHECK C. P. Mansoor Ahmed M. Com PGDBA
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Internal Control Size – Operation
“Internal Control is best regarded as the whole system of controls, financial and otherwise, established by the management in the conduct of a business including internal check, internal audit and other forms of control.”
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Internal Control Accounting & Administrative Controls –
Efficient and orderly conduct of transaction Safeguarding the assets in adherence to management policies Detection & Prevention of Errors & Frauds Ensuring Accuracy, Completeness, Reliability and Timely preparation of Accounting Data
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Internal Check One of the Modes of Implementing Internal Control
“a system under which the accounting methods and details of an establishment are so laid out that the accounts and the procedure are not under the absolute and independent control of any person – that, on the contrary, the work of one employee is complementary to that of another – and that a continuous audit of the business is made by the employees.”
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Good INTERNAL CHECK Division of Work Job Rotation Authority Levels
Separation of Custody and Recording Accounting Controls
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Vouching of CASH Transaction
OBJECTIVES: All Vouchers are Accounted No Fraudulent Payment is Made All Receipt & Payment are properly recorded Verify Cash in Hand & Cash at Bank
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Vouching – Voucher Verification of Transaction with counterfoils,
it is a documentary evidence supporting the transaction in the Books of Accounts. Verification of Transaction with counterfoils, Intelligence, Critical Bent of Mind, Common Sense, Observation.
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Vouching Voucher Numbering – Ordering
Attention to dates, names & amount Stamped, Initials etc Special Attention: Personal Name, Partner, Director Duly Signed, Authorized Duly Stamped Nature of Receipts & Payments Elucidation Scrutinize the Duplicate Vouchers Avoid involvement of Members of Client Staff Receipted Invoice Printed Receipts as Voucher Payments of Rent Rates & Taxes – Advances - Adjustments
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Internal Check as regards to Cash
Check internal operation Access to books of accounts Receipts against cash Rough Cash Book Remittances – opened before officer Automatic tills or cash register Deposit all cash receipt every day BRS prepared regularly Issue of Cheque – authorized by the officer Independent check of Castings of Cash Book Preparation of Wage sheet Payment by cheques except petty Collection by travellers
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Cash Book Debit Credit Opening Balance Cash Sales
Receipts from Debtors Income from Interest, Dividends etc., Loans Rents Received Bills Receivable Commission Sale of Investment Bad Debt Dividends Subscription Insurance Claim Money Share Capital Sale of Fixed Assets Miscellaneous Receipts Payment to Creditors Wages Capital Expenditure Loans Salaries Agent’s & Traveler’s Commission Travelling Allowance Insurance of Premiums Bills of Payable Bills Receivable Discounted & Dishonoured Freight Carriage & Custom Duties Bank Charges Partner’s Drawings Postage Petty Cash
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Internal Check as regard to PURCHASES
Orders – 2 copies (Supplier & Reference) On Receipt – Goods Receipt Book Invoice – Goods Receipt Book Verified Check Calculations in Invoice Invoice Copy – Person in charge Clerk – Purchases Book Initial the invoice copy.
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Duty of an Auditor – CREDIT PURCHASES
Return: Credit Note Purchase Return Journal Return Outwards Book Gate Keeper’s Outwards Book In clients name Authorize person in charge Date of Invoice – Period under review Review of Verification Goods on Invoice – Capital Test Check – Purchases Book Expenses Debited to Purchases Account Compare the Books Stamp, Check Mark, Initial Duplicates Credit Conformation Statement
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Internal Check as regard to SALES
Order – Order Received Book (Name, Particulars of Goods, Date & Mode of Transport) Copy – Dispatch Department Clerk compares goods in order packed by DD Rate of charge – Responsible officer Preparation of Invoice – 2/3 copies One copy – clerk – sales book One copy – gatekeeper – goods outward book Traveler Sales Man – 3 copies
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Duties of an Auditor – CREDIT SALES
Reasons for Return Gatekeeper Sales Return Book Credit Note Review Internal Check System in Place Invoice – Sales Book Compare Order Received Book, Goods Outward Book, Gatekeeper’s Outward Book, Delivery Note etc Sale of Asset – treated as a ordinary sale Statement of accounts from client Check sales during last days and weeks Cancelled invoice – duplicates Sales Tax & Insurance etc debited & credited into appropriate accounts Sales to sister concerns and associates Different trade discounts - examined Goods Sold on Sale or Return System Goods Sent on Consignment Packages & Empties Journal Bought Ledger Sales Ledger Total Accounts & Sectional Balancing
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Internal Check as Regard to WAGES
Check inclusion for Dummy Workers Errors or Fraud – piece work records Clerical Works Dispensed Employees – Retained Over Stating – Rates Over Stating Hours/days of Work Conversion of unpaid wages Over footing of pay roll sheets Understatement of deduction
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Internal Check with regard to WAGES
Time Records Piece Work Records Preparation of Wage Sheet Payment of Wages
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Duties of an Auditor - WAGES
Check Loop hole Wage Sheet or Wage Book Calculation are Correct Wages payable, paid & unpaid Dummy Workers Initialed ID verification Authorized Number of workers Wage sheet – ESI Card, PF Account Total wages – estimates of costing department Duly signed - comparison Leave register Wage payment vs. advance payment Employment of Casual Labourer Test Check
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INTERNAL AUDIT
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