by An internal check is a part of internal control. It is concerned with staff duties so that a single person is not allowed to record every aspect of a transaction. The purpose is to prevent or disclose. errors and frauds/ One person automatically check the work of another person without duplication of work. It is a built-in-device to facilitate the work of business concern. There is no additional duty for an internal check.
The work of one employee becomes dependent on another. The senior employee has powers to check the work of others. There is a need for complete harmony among the employees for doing their duties. The top-level management must be honest otherwise. Internal check cannot work properly, The effective internal check is desirable for large-scale business. In small business concern, it has no popularity due to less number of employees. There may be conflict among the workers. In this case, it has no utility at all. Anyhow it is essential for large concerns but it is a burden on small business.
Definition of Internal Check
Ronald A. Irish says that It refers to the organization of office duties in such a way as to prevent or disclose both errors and frauds.
L.R. Dickness says that It is an arrangement of book that error and frauds are likely to be prevented by the operation of the bookkeeping itself.
De Paula says that It means practically a continues internal audit carried on by the staff itself by means of which the work of each individual is independently checked by other members of the staff.
The internal check is an arrangement of the duties of the staff members of the accounting functions in such a way that the work performed by a person is automatically checked by another.
In the opinion of Spicer and Pegler, “A system of internal check is an arrangement of staff duties, whereby no one person is allowed to carry through and to record every aspect of a transaction, so that without collusion between two or more persons, fraud is activated and at the same time the possibilities of errors are reduced to the minimum.”
L.R. Dicksee defines internal check as “such an arrangement of book-keeping routine that errors and frauds are likely to be prevented or discovered by the very operation of the book-keeping itself.”
Internal check means practically a continuous internal audit carried on by the staff itself, using which the work of each individual is independently checked by other members of the staff.
Internal check has been defined by The Institute of Chartered Accountants of England and Wales (ICAEW) as; “the checks on -day to day transactions which operate continuously as part of the routine system, where the work of one person is proved independently or in complementary to the work of another, the object is the prevention or early detection of errors or frauds.”
An internal check is a continuous process and is part of the day-to-day routine. It relates to all the transactions that take place every day. An internal check is achieved by a complimentary allocation of duties and by independent verification of the work of one person by another.
Objectives of Internal Check
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Fraud Prevention
The purpose of the internal check is to frauds. The management can achieve this objective through the distribution of duties. One employee is allowed to perform one part of the others complete the other parts. In this way, many hands complete the work
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Assets Protection
The purpose of the internal check is to protect the assets. The management can take steps to safeguard the resources one person maintains the record and the custody are given to another officer. Top-level management makes the purchase and disposal. The assets are used for business purpose the periodical inspection of resources is necessary to avoid misuse of the resource.
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Error Prevention
The purpose of the internal check is to prevent errors. The management can devise such a system of internal that mistakes are prevented altogether. If there is negligence on the pan of one employee, it is pointed out by another employee who can check the person of the first person.
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Fixing Responsibility
The purpose of the internal check is to fix the responsibility of employees. The division of duties helps the management to locate the inefficient employees.’ The pending work provides chances of errors and frauds. The management can replace employees who are negligent in their duties,
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Moral Check
The purpose of the internal check is to develop high moral values. The work of one employee is supervised and checked by another employee. Alt employees feel the sense of responsibility, They complete their work on daily basis. Thus the efficiency of workers increases.
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Recording Facts
The purpose of the internal check is to record facts and figures in the books of accounts. The work of recording facts is divided among many employees, In this way, it is possible to prepare books of accounts, which can reflect the true and fair view of business work.
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Accounting System
The purpose of the internal check is to devise proper accounting system, It consists of personnel, procedure, records, form and used by an organization in developing and communicating accounting information.
Principles of Internal Check
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Sufficient Staff
The principle of internal check is sufficient staff, The employees can be appointed according to workload, The management can determine the amount of ‘work, which distributed among the departments. The persons are hired to perform their duties the overloading can create trouble for management.
- Division of Work
Division of work is a principle of internal check. The management can determine the total amount of work. The whole work is divided among departments. The heads of such departments are responsible for completion of work according to a timetable.
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Co-Ordination
Co-ordination is a principle of internal check. All departmental managers are bound to coordinate with each other in order to achieve the objectives of the organization. When there is a fault in one department, the work other departments suffers and the objectives cannot be achieved. It determines the degree of coordination among the managers.
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Rotation of Duties
Rotation of duties is a principle of internal check/ the workers bored by doing the same work from year to year. There is a need for rotation of duties. It is in the interest of the concern as well as the employee. The efficiency improves due to change in duties.
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Recreation Leave
The recreation leave is a principle of internal check. The employee can enjoy the recreation leave, It is necessary for the mental health of the employee, He cannot commit frauds as the new employee in his place can disclose the matter. The internal check system can work in the interest of the business, The weaknesses of one person are disclosed due to leave.
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Automatic Machines
The principle of internal check is that machines must be used to do accounting work if permissible. The machines can do a lot of work without delay, The chances of frauds and errors are reduced to a minimum. The working of machines improves the efficiency of the accounting staff,
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Checking
The principle of an internal check to check the work of other employees. Many’ persons perform the work. The officer can put his Signature to verify the work done by his subordinate. In this way one Work passes many hands, the chances of errors and frauds are minimized due to checking and counter-checking.
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Simple
The principle of internal check is simple working: The employee can understand the working of the internal check system. A person can work under the supervision of other employees. The line of authority moves from top to bottom level. Alt workers can understand their duties in the organization.
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Documents Classification
The classification of documents the principle of internal check. The business documents are prepared, collected recorded and placed in proper files. The index is prepared to compile data. The filing system as useful to place letters. In case of need, the documents can be traced quickly.
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Dependent Work
Dependent work is a principle of internal check. The work of one employee is dependent upon the others. One work passes through the hand of two or three persons till it is completed. The senior person checks the work of junior person, No person is, all In all, to start and complete the transaction,
- Harmony
The principle of internal check is harmony among the employees and departments, the understanding is essential for business goals. The management is to achieve other social and national objectives. The harmony is the basis for the successful internal check.
