INTERNAL CHECK - PowerPoint Presentation

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INTERNAL CHECK

C. P. Mansoor Ahmed M. Com PGDBA

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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.”Slide3

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 DataSlide4

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.”Slide5

Good INTERNAL CHECK

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Division of Work

Job Rotation

Authority Levels

Separation of Custody and Recording

Accounting ControlsSlide6

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 BankSlide7

Vouching – Voucher

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Voucher

:

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.Slide8

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 - AdjustmentsSlide9

Internal Check as regards to Cash

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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

travellersSlide10

Cash Book

Opening BalanceCash 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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Debit

CreditSlide11

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.Slide12

Duty of an Auditor – CREDIT PURCHASES

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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 StatementSlide13

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 copiesSlide14

Duties of an Auditor – CREDIT SALES

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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 BalancingSlide15

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 deductionSlide16

Internal Check with regard to WAGES

Time Records

Piece Work Records

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Preparation of Wage Sheet

Payment of WagesSlide17

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 CheckSlide18

INTERNAL AUDIT

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