Question:
Could anyone go into what exactly internal controls are briefly but precisely please?
Answers:
Internal controls are self cross checking measures adopted by organizations in carrying out a particular transactions. This is primarily done by joining the strings of work to different people.
A store keeper receives the goods, counts them and makes a goods received note. this note is forwarded to purchase department which matches the goods receipt note with the actual invoice. If it finds the quantity and other details matching with the invoice and purchase order placed, it will make the entry into books of accounts and initiate for payment.
Here, actual goods are received by a different person and entry in books of accounts is made by another and hence another makes the payment. This whole process makes it difficult for the employees to commit mistakes knowingly or unknowingly.
Internal control is the system designed for a company that ensures all records are kept correctly, all transactions are recorded properly, and all procedures are followed. Bank reconciliations are part of internal controls. This may consist of ensuring that people who receive money record the receipts, that the receipts are deposited intact each day by another person, that the person who is in charge of writing checks is not the same person who performs the bank reconciliation, and that another person checks the work to ensure the reconciliation is correct.
Internal control consists of rules such as separating the duties of employees, so that if one makes an error it will be found by another, assigning specific responsibilities, checking employees' backgrounds, rotating employees from one job to another, requiring vacations, etc.
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