Auditor Should first review the internal check system prevalent in the organization, then proceed to audit.” Discuss.
Internal check is a strategy for sorting out the records arrangement of a business concern or a processing plant where the obligations of various representatives are organized such that crafted by one individual is consequently checked by another and in this manner the likelihood of extortion, or mistake or anomaly is limited unless there is conspiracy between the agents. For instance, the receipt of money is entered by the clerk on the charge side of the money book; this passage is conveyed to the record by another agent; the announcement of record identifying with this exchange is sent to the client by a third representative et cetera. In this manner a similar exchange has gone through three distinct hands and crafted by one is checked consequently by the other. It is a sort of division of work. This limits the conceivable outcomes of fakes and mistakes unless all the three hold delivers cheating their boss.
As indicated by the exceptional council on Terminology, American Institute of Accountants, 1949 “Inner registration framework under which the bookkeeping techniques and points of interest of a foundation are so laid out that the records strategies are not under the total and free control of any individual – that, unexpectedly, crafted by one worker is correlative of that of another, and that a consistent review of the business is made by the representatives.”
The fundamental components of an inward check are :
(an) Instituting of keeps an eye on everyday exchanges.
(b) These checks work consistently as a piece of routine framework.
(c) Work of every individual is made reciprocal to crafted by another.
The target of such portion of the obligations is that nobody has a select control over any exchange.
Inner check framework in the different parts of the bookkeeping is given underneath :
Inside check as respects money
There ought to be an appropriate arrangement of interior ^heck in regard of all exchanges since lion’s share of the fakes emerge regarding money. The reviewer must acclimate himself with the arrangement of inner check in operation. Obligations in regard of trade ought to be isolated out such a way, to the point that there is programmed mind the different functionaries associated with money area. It is vital that representatives of the money are urged to take some time off. Revolution of obligations identifying with money segment ought to likewise be implemented.
Inside check as respects Cash Receipts
1. The clerk ought not approach the approaching mail books (which don’t concern him), unimportant money stores and the records.
2. Settlements ought to be opened by the clerk within the sight of a dependable individual. All checks and bank drafts got ought to be stamped – `Not debatable A/c Payee as it were.’
3. Every one of the receipts of the day ought to be saved in the bank by the day’s end or the following morning.
4. On getting money, it ought to be recognized by issuing a printed receipt. This receipt ought to have a counterfoil. These receipts ought to be sequentially numbered. The receipt ought to be kept safely secured.
5. Money registers ought to be utilized.
6. The clerk ought to set up the paying-in-slips to be held by the bank. In any case, the counter-foils of the paying-in-slips ought to be entered by some other agent and not by the Cashier.
7. Money deals ought to be so sorted out as to lessen the odds of misappropriation to the base.
8. Beyond what many would consider possible the arrangement of gathering by explorers ought to be debilitated. Be that as it may, on the off chance that they are approved to gather obligations for the benefit of the business, there ought to be appropriate tenets and controls.
9. Bank compromise articulation ought to be made by clerk and another person often.
Interior check as respects money installments
1. Beyond what many would consider possible, all installments ought to be made by checks approved by a capable individual and marked by capable people. Checks ought to be denoted’ A/c Payee just’ before they are despatched. Unused check books ought to be kept safely guarded by a dependable individual.
2. Workers approved to sign or catchword checks ought not have some other obligation associated with money. Else, it will furnish them with chance to impact passages in the records.
3. Negligible money ought to be kept up under the imprest framework.
4. There ought to be a proficient arrangement of inward check as respects compensation (talked about somewhere else in this section).
5. Vouchers ought to be numbered appropriately and documented all together. The clerk ought not be made a request.
6. There ought to be an appropriate inner check arrangement of money deals (examined in this part).
7. Castings of money book ought to be autonomously checked.
Inward check as respects compensation
If there should arise an occurrence of assembling concerns wage charge is of extraordinary size. The arrangement of inside check is of extraordinary significance in such worries as respects compensation. Any arrangement of inside check as respects compensation much balance the accompanying perils –
(i) Inadequate time records. This may bring about the specialists accepting wages for time not dedicated.
(ii) Inadequate piece work records. This will bring about specialists accepting wages for work not done.
(iii) Errors in planning of wage-sheets or pay rolls,
(iv) Manipulation of wage sheet by embeddings fakers.
The arrangement of inside check to be proposed will differ as per every specific case.
In any case, to neutralize the above perils, the accompanying arrangement of inner check is recommended :
1. Time Records : Where the wages are to be paid by the time premise, the seasons of representatives entering and leaving the work ought to be recorded. This might be done either by a guardian or time recording clock. Further, the foreman of every office should take the season of entering and leaving the office. This won’t just go about as a counter-keep an eye on the first records yet additionally as an impediment to squandering to times by the laborers.
2. Piece work records : Where compensation are paid on piece-compensation premise, a proficient arrangement of recording piece work is basic. At the point when the work is given, it ought to be entered in the concerned piece laborer’s card. On finish, this card ought to be marked by the laborer and foreman. Where essential, it ought to be marked by the vendor.
3. Planning of wage-sheets : Separate wage-sheets ought to be utilized for time laborers and piece specialists. They ought to be ruled to record all the fundamental particulars. Uncommon sections ought to be accommodated the gross sum payable, conclusions for representatives, state protection, provident reserve commitment, advances, fines and so forth and the net sum payable. Sections ought to likewise be given demonstrating the businesses’ commitment under the Employees State Insurance Act.
For time laborers, the watchmen records and departmental time records ought to be looked at by two assistants in the wage office. Disparity, assuming any, ought to be enquired into. A third assistants should record on the wages sheet, the name of the workers, rate of wages and different particulars. These passages ought to be checked by another representative. Net sum payable to every laborer ought to be figured by another assistant. So also, wage sheets ought to be set up for the piece specialists following the above system. It ought to be recollected that each wage assistant should introductory for that bit of work associated with wage sheet attempted by him. All the wage sheets ought to be counter marked by the Works Manager, a Director or a Partner.
4. Installment of wages : Wages ought to be paid by Cashier. The clerk ought not have any turn in the readiness of wage sheets. A different check ought to be drawn for the exact measure of the wages. The specialists ought to go to actually to get their wages within the sight of their foreman to maintain a strategic distance from pantomime. Wages of the non-attendants ought to be paid to a specialist just when he has brought letter of expert. The Works Manager or some dependable officer ought to be available at the season of installment.
Inward check as respects buys
For this reason the arrangement of inner check to be embraced by any worry will rely upon its size and assets. In any case, the accompanying arrangement of inward check for buys is recommended –
1. Every one of the requests for buys ought to be recorded in the Purchases Order Book. They ought to be legitimately approved. A duplicate of each request put ought to be kept.
2. On receipt of the merchandise, the watchman or vendor should make a record in the Goods Inwards Books.
3. Solicitations got from the merchants ought to be checked with the Orders Books and Goods Inwards Books as to its quality, amount, costs and figurings. The assistants checking them should likewise starting the solicitations. After this solicitations ought to be entered in the Bought Day Book and recorded.
4. In the event that, there are various divisions, each submitting its request, the receipt ought to be sent to the concerned office for checking.
5. Section for all merchandise acquired ought to be made by an autonomous individual in the stores record.
6. The installment of each receipt ought to be approved by a mindful authority.
7. An appropriate arrangement of inside check for trade buys ought to be out operation. Beyond what many would consider possible, money buys ought to be debilitated.