Page 60 - DCOM509_ADVANCED_AUDITING

Unit 4: Internal Control

2. Authorization, Record and Control Procedures: The basic objective of authorization, record Notes
and control procedure should be to ensure that:

 Every item of expenditure has been properly authorized and accounted for.
 Every item of receipt has in fact been received and duly accounted for.
 There is proper custody of the funds and other assets of the enterprise, and there is
no misapplication or misuse of the same.

This will necessitates for having an appropriate procedures for proper review and
authorization of all transactions before they are entered in the books of account. Documents
pertaining to each transaction should bear signatures or initials of the persons concerned
to ensure effective accountability. Fixing of responsibility for the transaction will become
easier if there is an accounting manual laying down the authorities and responsibilities of
all persons connected with the accounting work.
3. Sound practices: An effective internal control system must have inherent safeguard in
procedures and processes. A strong system of internal check should be in practice. Under
internal check system, it should be ensured that no person alone handles a transaction
completely from beginning to end. Moreover, there should be inbuilt system, which
ensures that work of every individual gets checked automatically by another person.

4. Quality of Personnel: The availability of competent and efficient personnel is a basic
prerequisite of an effective internal control system. It is the competent executives who
carry out and enforce effectiveness in the internal control system. Competency of personnel
does not mean competency of departmental heads and key personnel alone, but all the
persons, who perform routine tasks at different levels. This will require proper selection
and training of the personnel, backed by effective direction, supervision and control and
an ample provision for quick corrective action to prevent lax performance, or violation of
prescribed procedures.



Caselet Internal Control Self-assessment Procedures

Abstract
An organisation recognised that the policies and procedures they had in place could not
ensure the continued effectiveness of their operations.
Challenge
We were engaged by an organisation to develop procedures that would allow them to
assess the internal financial controls that were in place. The scope of this engagement also
included the review of these procedures as they were implemented to ensure their
effectiveness.
Approach
The approach taken in this engagement involved examination of a number of areas:

 Policies and procedures are clearly stated
 Adequate review processes are exercised
 Systems in operation are effective and efficient

Contd....

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