Internal Control over Sales

Internal Control over Sales

• Following suggestions are given for a proper control over sales.
• Sales should be done preferably on cash basis
• Order received from customer should be in written. All the particles about goods such as name date and mode of transportation should be written in the order received book.
• For the execution of order proper time limits should be fixed for each of the department of the organization or business.
• Two or three copies of invoices should be made for each transaction. One must be sent to the buyer, second to the invoice clerk and third to the gate keeper.

• Invoice should be checked by a responsible person. Who offers his signature on it?
• An officer should check the goods before packing and should see that only those goods dispatched which have been ordered.
• At the gate all the goods should be entered in the goods outward register by the gate keeper. Against each any entry number of invoices must be shown.
• Each invoice should be numbered and quickly recovered in the sale book.
• All the goods returned by the customers should be entered in the goods inward register and a credit note should be passed by a responsible officer of the business.
• Amounts received by the customers must be immediately deposited into the bank and if the payment is to be made at some future then a letter of collection should be sent
• Discounts should be given to those customers who made payments early.
• Salesman should not be allowed to make entries in the sale receivable register. Cashier should not be allowed to pass the entries in the sale book. Only the accountant of the business should be allowed to pass entries in the books of accounts and in the sale book.
• Proper provision should be made on and doubtful debts in the books of accounts.
• Written records of all activities relating to sales should be maintained.
• Sales offers should be made to the old customer from whom no order has been received in the near past. 

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Objectives and Limitations of Internal Control

Objectives of Internal Control

The purpose of internal audit is to protect the assets so that is why internal auditors keep proper records of asset. Its purpose is detecting the errors in the accounting records. These errors are detected by the internal auditors during the whole year. Its purpose is to detect the frauds in the books of accounts. Its becomes possible because there is no gap between recording and checking. Its purpose is to evaluate accounting system. This can be done by comparing the vouchers with the entries. Internal check system can be evaluated by internal audit. It finds out weather the staff members are working properly or not. Its purpose is to examine accounting policies. The internal auditor finds out the weakness and makes comments on accounting policies. Its purpose is to determine the liabilities of the employees through internal audit. It is easy to note the negligence of the employees. Its purpose is to help the management by pointing out the weakness. It can be used as a tool to correct the situation. It helps an independent auditor to so that the external auditors can rely on internal auditors and there is no need of cent percent checking. Its purpose is to provide suggestions for the improvements of business activities. The internal audit staff can suggest the ways and means to remove difficulties. Its purpose is to keep proper control over the business activities. The internal auditor of the organization can determine the degree of control over the work. Tis purpose is to find out what weather the statements shows true and fair picture of not. The purpose of internal audit may be to control the special investigation about any business matter. Its purpose is to determine the proper use of resources means that the management is efficient. Its purpose is to review the working of business the corrective measures can be taken for proper working.

Limitations of Internal control

The limitations of internal audit are that there may not be proper division of duties. In this case the auditor is unable to fix the responsibility for negligence. The limitations of internal audit are that there may be errors in the books of accounts because of incompetent staff. The purpose of internal audit fails to help the management because of incompetent staff of the organization. There may be lack of experience and training. The limitation of internal audit is that the management may not feel their responsibilities in completing audit formalities. The shortage of audit staff is an obstacle to get the benefit of internal audit. The limitations of internal audit starts when there is time to lag between recording and checking entries. There are many limitations of internal audit which arise during the working year of the organization and with these limitations an internal audit could not perform his duty and work in the better way.

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Principles of Internal Control By Auditingarticles

Principles of Internal Control 

Following are some principles of Internal Control

One person should perform one duty and it is the responsibility of that person, and the duty must be clear cut, for example one person should record while other keep cash book. All daily communication received should be opened daily by a responsible office. All daily communication received should be opened daily by a responsible office. Credit notes for return, allowances, discounts and bad debts etc. should be authorized by chief accountant. The books of accounts of business should be maintained by double entry system. This system helps in minimizing the chances of errors and irregularities. Internal audit is a part of internal control. It helps the concern to check the errors and frauds. 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 transaction. It is not in the best interest of the business to relay on any person completely. So too much confidence is not beneficial for the business. Petty cash book must be kept on impress system. Periodical or surprise inspection should be carried out by a responsible and relevant officer for example, purchase manager or chief accountant.  All payments should be made in the forms of crossed cheques and must be approved by a responsible official person i.e. Chief Accountant.

Measures should be taken for the physical protection of assets and wastage and theft. Receipts books are used for the issue of receipts and it should be printed, it should be numbered consecutively i.e. serial number, it should have a carbon copy. The Duties of clerks should be changed from the branch to branch and from department to department. All remittances should be received in the form of cheques, drafts etc. should be crossed and deposited in the bank as soon as possible. Whenever a new person is employed a written undertaking should be taken that he will keep the secrecy of the business. Supervision is essential in the internal control and this supervisory control makes the business more effective and long running. The amount of staff should be sufficient so that the load of work can easily be distributed. Whenever a person is employed, a guarantee (personal or in the form of cash) should be taken from the new person before the employed. It is also very beneficial for the business. If the financial resources of the business permit them electric machines should used for checking different accounts. Salaries should be paid in the forms of cheques and wages should be prepared by foreman and then paid by the cashier in order to avoid fraud chances. These steps are very helpful in the internal control of any organization.

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