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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