Professional Documents
Culture Documents
Unit 2 Internal Check System
Unit 2 Internal Check System
Unit :2
Routine Checking
• Whatever may be the size, constitution and
nature of activities and transactions of
a business, there are certain records and
books which are common to all types of
business organizations.
• The checking of such common records and
books which is carried on by the auditor as a
matter of routine is known as routine checking
in auditing
• Routine checking can verify the arithmetical
accuracy of the entries made in the books of
accounts. It can help in checking, casting and
postings and, as such, can ensure that no
alterations are made in the figures after they
have been checked and ticked accordingly.
Routine checking involves normally
four types of functions
(i) Checking of casts, sub casts, carry-forwards
and other calculations in the books of original
entry.
(ii) Checking of postings into the ledgers
(iii) Checking of casts and balances of various
accounts in the ledger.
(iv) Checking of transfer of balances from the
ledger on to the trial balance.
Advantages of Routine Checking
(i) The books of original entry can be thoroughly checked and the errors and fraud can
be easily detected.
(ii) Postings (i.e., matters taken from records made in the books of original entry to the
ledger) can be checked.
(iii) The checking of castings and postings done in routine checking is the very basis
upon which the final results of audit depend. Hence, it helps in the checking of
final accounts ultimately.
(iv) It reveals the errors and fraud of a simple nature and, if done with care and
caution, it helps in the verification of the arithmetical accuracy of the entries.
(v) Routine checking is a simple job which can be done easily by a person with an
ordinary knowledge of accounts.
• RECEIPTS
• PAYMENTS
• SALES
RELATION TO RECEIPTS OF CASH
Receipts of a cash must be handled by a separate clerk
known as cashier.
Bank reconciliation statement should be prepared by
the cashier to reconcile bank and cash balance.
All debtors or customers requested tomake payments
by crossed cheques.
Automatic bills or cash registers are useful forchecking
receipts.
The counter-foils of all the receipts issued should be
properly maintained.
RELATION TO PAYMENTS OF
CASH
All payments should be made by cheques.
Petty cash payment should be handled by the
petty cashier.
Names, numbers and the status of persons
authorized to sign cheques must be decided.
Confirmation of accounts with creditors should
be made to maintain up-to-date records.
A proper system must be adopted for controlling
the supply and issue of cheques.
RELATION TO CASH SALES
• Separate salesman should be appointed to carry out sales at
different counters.
• As fraudulent manipulations are common during the first and last months
of the period under audit, the entries made during these periods should be
checked thoroughly.
• In the selection of entries and accounts for applying test checks, care
should be taken to check the different portions of the work at each audit.
• The clerks of the client may become careless because they know that
their work will not be checked in detail.
• Under test checking, although the auditor checks the whole of the
work through test checking, and doubt will remain in his mind.