what is Internal Control system?

Auditing is basically examining records, financial activities incurred during a period and ensuring that such record is error free, fraud free and that records are accurate, reliable and efficient. Is your firm a service organization or a manufacturing organization?

Whatever your firm is into, ensure that you install a comprehensive internal control system in your company. The basis and ways of installing a control system will be revealed in this chapter. Don't contract any accountant; you can install it in your company by following my guidelines. Please ensure that in installing this control system, it should be effectively executed/carried out. i.e. even you who is the proprietor should carry out your own part for the requirement of the control system.

You should not be found wanting in discharging your own side of the control system or else your ability to examine, scrutinize and evaluate your financial activities yourself would be defeated. You might ask, what is “a comprehensive control system”?

It's the measures taken by an organization for the purpose of protecting its resources against waste, fraud, and inefficiency, ensuring accuracy and reliability in accounting and operating data, securing compliance with organization policies and evaluating the level of performances in all divisions of the organization. With this definition, you will agree with me that this is a tool for control over the systems in an organization, because a system of accounting and record keeping will not succeed in an organization unless these known controls are built into the system.

The purposes of internal control are: a) To ensure that transactions are executed in accordance with proper general or specific authorization b) To ensure that errors, irregularities are avoided. c) To ensure that access to assets such as cash, motor vehicle, plant & machinery, stocks etc is permitted only in accordance with laid down policy d) To ensure that recorded items are properly analysed.