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INTERNAL CHECK
C. P. Mansoor Ahmed M. Com PGDBA
Internal Control
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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.”
Internal Control
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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
Internal Check
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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.”
Good INTERNAL CHECK
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Division of Work
Job Rotation
Authority Levels
Separation of Custody and Recording
Accounting Controls
Vouching of CASH Transaction
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OBJECTIVES:
 All Vouchers are Accounted
 No Fraudulent Payment is Made
 All Receipt & Payment are properly recorded
 Verify Cash in Hand & Cash at Bank
Vouching – Voucher
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Voucher:
it is a
documentary
evidence
supporting the
transaction in
the Books of
Accounts.
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Verification of Transaction with
counterfoils,
Intelligence, Critical Bent of Mind,
Common Sense, Observation.
Vouching
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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
Internal Check as regards to Cash
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Check internal
operation
Access to
books of
accounts
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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
Cash Book
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Debit
Credit
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Opening Balance
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Payment to Creditors
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Cash Sales
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Wages
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Receipts from Debtors
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Capital Expenditure
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Income from Interest, Dividends etc.,
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Loans
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Loans
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Salaries
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Rents Received
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Agent’s & Traveler’s Commission
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Bills Receivable
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Travelling Allowance
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Commission
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Insurance of Premiums
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Sale of Investment
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Bills of Payable
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Bad Debt
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Bills Receivable Discounted & Dishonoured
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Dividends
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Freight Carriage & Custom Duties
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Subscription
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Bank Charges
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Insurance Claim Money
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Partner’s Drawings
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Share Capital
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Postage
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Sale of Fixed Assets
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Petty Cash
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Miscellaneous Receipts
Internal Check as regard to PURCHASES
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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.
Duty of an Auditor – CREDIT PURCHASES
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Return:
Credit Note
Purchase
Return Journal
Return
Outwards
Book
Gate
Keeper’s
Outwards
Book
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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
Internal Check as regard to SALES
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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
Duties of an Auditor – CREDIT SALES
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Reasons for
Return
Gatekeeper
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Sales Return
Book
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Credit Note
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Review Internal Check System in Place
Invoice
– Sold
SalesonBook
Goods
Sale orCompare
Return System
Order Received Book, Goods Outward Book,
Goods Sent onOutward
Consignment
Gatekeeper’s
Book, Delivery Note etc
SalePackages
of Asset
– treated as a ordinary sale
& Empties
Statement of accounts from client
Check sales during last days and weeks
Journal invoice – duplicates
Cancelled
SalesBought
Tax Ledger
& Insurance etc debited & credited into
appropriate accounts
Sales Ledger
Sales to sister concerns and associates
Total Accounts & Sectional Balancing
Different trade discounts - examined
Internal Check as Regard to WAGES
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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
Internal Check with regard to WAGES
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Time Records
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Preparation of Wage
Sheet
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Piece Work Records
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Payment of Wages
Duties of an Auditor - WAGES
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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
INTERNAL AUDIT
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