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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 –

 Efficientand 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:  Verification of Transaction with

it is a counterfoils,
documentary
evidence  Intelligence, Critical Bent of Mind,
supporting the
transaction in
Common Sense, Observation.
the Books of
Accounts.
 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
 Receipts against cash
operation  Rough Cash Book
Access to  Remittances – opened before officer
books of  Automatic tills or cash register
accounts
 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
 Opening Balance  Payment to Creditors
 Cash Sales  Wages
 Receipts from Debtors  Capital Expenditure
 Income from Interest, Dividends etc.,  Loans
 Loans  Salaries
 Rents Received  Agent’s & Traveler’s Commission
 Bills Receivable  Travelling Allowance
 Commission  Insurance of Premiums
 Sale of Investment  Bills of Payable
 Bad Debt  Bills Receivable Discounted & Dishonoured
 Dividends  Freight Carriage & Custom Duties
 Subscription  Bank Charges
 Insurance Claim Money  Partner’s Drawings
 Share Capital  Postage
 Sale of Fixed Assets  Petty Cash
 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:
 In clients name
 Authorize person in charge
Credit Note
 Date of Invoice – Period under review
Purchase  Review of Verification
Return Journal
 Goods on Invoice – Capital
Return  Test Check – Purchases Book
Outwards
Book  Expenses Debited to Purchases Account
Gate
 Compare the Books
Keeper’s  Stamp, Check Mark, Initial
Outwards  Duplicates
Book
 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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 Review Internal Check System in Place

Reasons for
Return  Invoice
Goods– Sold
SalesonBook
Sale orCompare
Return System
 Order Received Book, Goods Outward Book,
Gatekeeper Goods Sent onOutward
Gatekeeper’s Consignment Book, Delivery Note etc
Sales Return  SalePackages
of Asset – treated as a ordinary sale
& Empties
Book  Statement of accounts from client
Credit Note
 Check sales during last days and weeks
 Cancelled
Journal invoice – duplicates
 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  Piece Work Records

 Preparation of Wage  Payment of Wages

Sheet
 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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