Internal Control Internal Checking Internal Auditing - Auditing By LATiFHRW
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This document discusses internal control, internal check, and internal audit. It defines these terms and outlines their objectives and characteristics. Internal control involves plans and measures to safeguard a business's assets. Internal check involves segregating duties among staff to check each other's work and prevent fraud and errors. Internal audit is an independent review of a company's operations, policies, controls, and accounting processes to evaluate effectiveness and risks. The document provides details on how these tools help management and auditors ensure accuracy, accountability, and effective decision making.
Internal Control Internal Checking Internal Auditing - Auditing By LATiFHRW
- 2. Internal Control Internal Check Internal Audit Presented By: Altaf Hussain Junejo (2K18/MBA/13) Lateef Hyder Wadho (2K18/MBA/54) Abid Hussain Mugheri (2K18/MBA/6) Institute Of Business Administration University Of Sindh Jamshoro Submitted to: Madam Saira Baloch
- 3. Internal Control • Internal Control system is one of the basic and essential factors for efficient and effective management. • It covers the whole management system of an organization, both financial and non-financial. • Internal control system is helpful for the management and also the Auditor in achieving goals and targets effectively. • Internal Control comprises of the plan of the organization and all the coordinate methods and measures adopted within a business to safeguard its assets.
- 4. Objectives From Auditor’s point of view • It is important for the auditor to evaluate the system of Internal Control. • To obtain an adequate understanding of the internal control system. • The auditor has to determine whether audit is possible or not. From Client’s point of view • It helps in decision making and to run business effectively. • Safeguard business assets. • Minimize the wasteful activities and focus on performing activities of a business.
- 5. Characteristics Of Internal Control ● Competent and trustworthy personnel ● Records, Financial and other Organization plan ● Organizational plans ● Segregation of duties ● Supervision ● Authorization ● Sound practice ● Internal Audit ● Arithmetic and accounting controls
- 6. Internal Check • Internal Check is a valuable part of Internal Control. • It is the built-in check in accounting process itself. • It is an arrangement of duties of staff members in such a way that the work performed by one person is automatically checked by the other. • It is an essential feature that no one employee or a group of employees has exclusive control over any transactions or group of transactions. • It helps in minimizing the possibility of fraud, error or irregularity. • According to ICAI “It is a system of allocation of responsibility, division of work and ,method of recording transactions whereby the work of an employee or group of employees is continuously by correlating it with the work of others.”
- 7. Characteristics of Internal Check • To eliminate the frauds and errors which may be committed by the staffs. • To prevent misappropriation of cash or stock. • To ensure the reliability of information produced by the accounting system. • To detect errors and frauds promptly which helps to minimize their effects in long term. • To exercise moral pressure over the staffs.
- 8. Advantages & Disadvantages of Internal Check ADVANTAGES • It helps in fixing the responsibility as there will be proper segregation of duties among the staff. • It helps in Increasing the efficiency of clerks 3. It helps in preventing errors and frauds. • There is a reliability of the information due to efficient system of Internal Check. • It reduces the workload of auditor. DISADVANTAGES • It is a costly process for a small scale business. • If Internal Check system not properly organized it may lead to disorder in the working of the business. • There may be situation of compromise while giving importance to faster results. • There are chances of conflicts in business due to detection of error or frauds.
- 9. INTERNAL AUDIT • It is the review of operations and records undertaken by a specially assigned staff on a continuous basis. • It is an important element of the internal control system. • It not only focussed purely on finance but also reviews and undertakes a critical appraisal of companies policies and procedures. • It is focussed in maximizing organisational effectiveness. • It evaluates companies internal controls along with its corporate governance and accounting processes. • According to ICAI • “Internal Audit is an independent management function which involves a continuous and critical appraisal of the function of the entity”
- 10. Scope of Internal Audit • Internal audit can be used to safeguard the assets of an organization. • It helps in monitoring the Internal control of the organization by reviewing controls, monitoring their operation and recommending improvements. • It helps in review of Operating Activities through reviewing the economy, efficiency and effectiveness and operating activities. • It helps in the management of Risk by identifying and evaluating significant exposures to risk. • It helps in economical and efficient use of resources.
- 11. Objectives of Internal Audit • To verify the correctness, accuracy and authenticity of the financial accounting and statistical records presented to the management. • To facilitate the early detection of frauds and to prevent it. To examine the protection afforded to company's assets and use of them for business purpose. • To identify the authorities responsible for purchasing assets and other items as well as disposal of assets. • To ensure that the accounting practices which have to be followed by the organization are strictly followed.