Article 3 Internal control refers to dynamic processes and mechanisms designed to achieve objectives through formulation and implementation of systematic rules, processes and methods. The said processes and mechanisms involve the board of directors, board of supervisors, senior management and staff at all levels. Article 4 Objectives of internal control of commercial banks:
Accuracy and reliability are paramount in the accounting world. Without accurate accounting records, managers cannot make fully informed financial decisions, and financial reports can contain errors. Internal control procedures in accounting can be broken into seven categories, each designed to prevent fraud and identify errors before they become problems.
Separation of Duties Separation of duties involves splitting responsibility for bookkeeping, deposits, reporting and auditing. The further duties are separated, the less chance any single employee has of committing fraudulent acts. For small businesses with only a few accounting employees, sharing responsibilities between two or more people or requiring critical tasks to be reviewed by co-workers can serve the same purpose.
Access Controls Controlling access to different parts of an accounting system via passwords, lockouts and electronic access logs can keep unauthorized users out of the system while providing a way to audit the usage of the system to identify the source of errors or discrepancies.
Robust access tracking can also serve to deter attempts at fraudulent access in the first place. Physical Audits Physical audits include hand-counting cash and any physical assets tracked in the accounting system, such as inventory, materials and tools. Physical counting can reveal well-hidden discrepancies in account balances by bypassing electronic records altogether.
Counting cash in sales outlets can be done daily or even several times per day. Larger projects, such as hand counting inventory, should be performed less frequently, perhaps on an annual or quarterly basis.
Standardized Documentation Standardizing documents used for financial transactions, such as invoices, internal materials requests, inventory receipts and travel expense reports, can help to maintain consistency in record keeping over time. Using standard document formats can make it easier to review past records when searching for the source of a discrepancy in the system.
A lack of standardization can cause items to be overlooked or misinterpreted in such a review. Trial Balances Using a double-entry accounting system adds reliability by ensuring that the books are always balanced.
Even so, it is still possible for errors to bring a double-entry system out of balance at any given time. Calculating daily or weekly trial balances can provide regular insight into the state of the system, allowing you to discover and investigate discrepancies as early as possible.
Periodic Reconciliations Occasional accounting reconciliations can ensure that balances in your accounting system match up with balances in accounts held by other entities, including banks, suppliers and credit customers.
For example, a bank reconciliation involves comparing cash balances and records of deposits and receipts between your accounting system and bank statements. Differences between these types of complementary accounts can reveal errors or discrepancies in your own accounts, or the errors may originate with the other entities.
Approval Authority Requiring specific managers to authorize certain types of transactions can add a layer of responsibility to accounting records by proving that transactions have been seen, analyzed and approved by appropriate authorities. Requiring approval for large payments and expenses can prevent unscrupulous employees from making large fraudulent transactions with company funds, for example.Internal controls over cash management are needed at all levels of the organization that handle cash and/or cash equivalents, i.e., coupons, credit card slips, etc.
Both program. Acknowledgements. MEDA acknowledges the contribution and input of Ruth Dueck Mbeba, Joyce Lehman, L.B. Prakash, Praveesh Kunam, Madhurantika Moulick and Jasper Vet in . A well-designed internal control structure can enhance operations by improving your department's overall efficiency and effectiveness, as well as, reducing the risk of loss or theft.
A bank lock box establishes accountability and restricts access to cash, in addition to streamlining operations by providing immediate deposits and (possibly.
INTERNAL CONTROL GUIDE CASH COLLECTIONS INTRODUCTION. Cash is the most liquid of assets and is susceptible to loss if not properly controlled. Therefore, it is extremely important all departments handling cash implement and adhere to strong internal controls.
Financial Services Regulatory Commission, Antigua and Barbuda November Internal Control Systems and Maintenance of Accounting and Other Records.
Since cash is the most liquid of all assets, a business cannot survive and prosper if it does not have adequate control over its cash. Cash is the asset that has the greatest chance of “going missing” and this is why we must ensure that we have strong internal controls build around the cash process.