INTERNAL CONTROL :-The whole system or control financial or otherwise employed to carry on the business is called internal control. Internal audit, internal check and other such forms of control are also included in it.
Objects Of Internal Control :-
To achieve the following objects internal control system is employed :
1. The errors and frauds of clerk may be prevented.
2. To prevent the goods and cash misappropriation by keeping check on the receipts and delivery.
3. To keep an accurate record of all the business transactions.
PRINCIPLES OF INTERNAL CONTROL :-
Following are the important principles of internal control :
1. Record And Books :-
Books should be kept upto date and at regular intervals these should be balanced. Handling of cash transactions should be made by the different persons. For instance the cashier should not be allowed to record the cash received accounts book. He should have no concern with written ledgers.
2. Independent Checking :-
Work performed by one person should be independently and automatically checked by another person.
3. Principle Relating To Staff :-
Duties of each staff member should be clear and there should be no confusion and doubt in this regard. In case of any staff member absence duties arrangements should be made in advance.
4. Changing :-
It is also an important principle that no one should handle the transaction from beginning to end. Because in this situation there is a chance of fraud. Generally most of the frauds are committed due to this reason.
5. Proper Supervision :-
For the effective internal control system management should have upto date information about the trade and financial position of the company. So it should exercise proper supervision for effective operation of internal control system.
6. Clear Rules :-
All those rules relating to cash, stock, receipts and issuance of goods should be very clear and well defined. It should be also checked that there rules should be followed by the employees properly.
7. Instructions In Working :-
For the effective internal control it is necessary that all the instructions should be in writing in the form of accounting manuals.
8. Qualified And Competent Staff :-
For effective control system there is also a need of qualified and competent staff. Every staff member should be properly placed according to his skill and qualification.
9. Double System Of Accounting :-
For internal control double accounting system is also very useful. No doubt it is comparatively expensive but it must be used for effective control.
10. Incentive For Honest Worker :-
Honest and hard working person must be encouraged. He should be given some reward in the shape of promotion and cash. This principle is also very effective in improving the internal control.
11. Use Of Machines :-
For tabulation and keeping the accuracy of the record various mechanical instruments like calculators and computers must be introduced.
12. Performance Of Duties Record :-
Allocated functions to the employees were performed according the procedure or not. There should be a proof and proper record of their performance and also it indicate that it has been checked properly.
13. Record Of Goods And Assets :-
All the companies assets and properly record should be maintained properly. There should be also the security measures for the properly.
14. Surety Bonds :-
To protect the company from fraud and to make the internal control more effective surety bonds can be taken from the employees.
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