The internal check is a system that organizes the responsibilities of accounting staff members so that another automatically checks one person's work.
Internal check refers to a continual internal audit conducted by the staff, in which other members of the staff independently examine each individual's work.
An internal check is a continual procedure that is carried out daily. It refers to all of the transactions that occur daily. An internal check is accomplished through a complementary assignment of responsibilities and independent verification of one person's work by another.
Objectives of Internal Check
The followings are the main objectives of Internal Check in Auditing:
1. Early Detection of Errors and Frauds
The primary goal of internal auditing is to detect and prevent errors and frauds as soon as possible. This is achievable since each person's work is separately checked.
2. Errors and Frauds Minimization
This is one of the critical goals of internal auditing. There is a check on the work of dishonest people because another person checks each individual's work. As a result, the risk of errors and fraud is reduced to a more significant extent.
3. Work Division
Internal checks ensure that work is divided correctly depending on each individual's skill, ability, specialization, and effectiveness.
4. Assigning Responsibilities
The overall task is broken down into smaller components and assigned to different people. Every individual understands what is expected of them, and they will be held accountable for any errors or fraud that occurs. Internal auditing ensures that accountability is clearly defined.
5. Record Reliability
The system ensures that the books of accounts and other records kept are dependable data sources.
More other objectives of Internal Check:
1. To exert moral pressure on the employees.
2. Ensure that the accounting system generates accurate and timely data.
3. To protect the business's resources from fraud, carelessness, and inefficiency.
4. Distribute tasks in such a way that no business is unaccounted for.
5. To assign each clerk's duties and obligations so that he can be held accountable for specific fraud or errors.
6. To improve clerk efficiency by utilizing division of labour in the assignment of duties.
7. To easily detect errors and frauds if they occur because an effective internal check system includes a facility for independent verification.
Internal Check Principles
An internal check is based on a set of guidelines. An internal check is useless without it. The following are the guiding principles:
1. The procedure should be divided among its employees based on their responsibilities, rights, and responsibilities. Interference is not permitted.
2. No single person should have complete authority over the most crucial areas of the company.
3. The business's employees' responsibilities should be rotated from time to time so that no one is stuck doing the same thing for an extended period.
4. Every employee should be encouraged to take a vacation at least once a year.
5. This will aid in the detection of hidden fraud.
6. An effective internal check system should allow others to check an assistant's work automatically.
7. Work division should not be prohibitively expensive.
8. The self-balancing system must always be used.
9. Different officers should be given varying degrees of financial and administrative authority.
10. A person who has physical possession of assets should not be allowed access to the accounting books.