Internal Control Internal Checking Internal Auditing - Auditing By LATiFHRW

2. Internal Control
Internal Check
Internal Audit
Presented By:
Altaf Hussain Junejo (2K18/MBA/13)
Lateef Hyder Wadho (2K18/MBA/54)
Abid Hussain Mugheri (2K18/MBA/6)
Institute Of Business Administration
University Of Sindh Jamshoro
Submitted to: Madam Saira Baloch

3. Internal Control
• Internal Control system is one of the basic and
essential factors for efficient and effective
management.
• It covers the whole management system of an
organization, both financial and non-financial.
• Internal control system is helpful for the
management and also the Auditor in achieving
goals and targets effectively.
• Internal Control comprises of the plan of the
organization and all the coordinate methods
and measures adopted within a business to
safeguard its assets.

4. Objectives
From Auditor’s point of view
• It is important for the auditor to evaluate the system of
Internal Control.
• To obtain an adequate understanding of the internal control
system.
• The auditor has to determine whether audit is possible or
not.
From Client’s point of view
• It helps in decision making and to run business effectively.
• Safeguard business assets.
• Minimize the wasteful activities and focus on performing
activities of a business.

5. Characteristics Of Internal Control
● Competent and trustworthy personnel
● Records, Financial and other Organization plan
● Organizational plans
● Segregation of duties
● Supervision
● Authorization
● Sound practice
● Internal Audit
● Arithmetic and accounting controls

6. Internal Check
• Internal Check is a valuable part of Internal
Control.
• It is the built-in check in accounting process itself.
• It is an arrangement of duties of staff members in
such a way that the work performed by one person
is automatically checked by the other.
• It is an essential feature that no one employee or a
group of employees has exclusive control over any
transactions or group of transactions.
• It helps in minimizing the possibility of fraud, error
or irregularity.
• According to ICAI
“It is a system of allocation of responsibility, division of
work and ,method of recording transactions whereby the
work of an employee or group of employees is continuously
by correlating it with the work of others.”

7. Characteristics of Internal Check
• To eliminate the frauds and errors which may be committed by
the staffs.
• To prevent misappropriation of cash or stock.
• To ensure the reliability of information produced by the
accounting system.
• To detect errors and frauds promptly which helps to minimize
their effects in long term.
• To exercise moral pressure over the staffs.

8. Advantages & Disadvantages of Internal
Check
ADVANTAGES
• It helps in fixing the responsibility as there will be proper segregation
of duties among the staff.
• It helps in Increasing the efficiency of clerks 3. It helps in preventing
errors and frauds.
• There is a reliability of the information due to efficient system of
Internal Check.
• It reduces the workload of auditor.
DISADVANTAGES
• It is a costly process for a small scale business.
• If Internal Check system not properly organized it may lead to disorder
in the working of the business.
• There may be situation of compromise while giving importance to
faster results.
• There are chances of conflicts in business due to detection of error or
frauds.

9. INTERNAL AUDIT
• It is the review of operations and records undertaken
by a specially assigned staff on a continuous basis.
• It is an important element of the internal control
system.
• It not only focussed purely on finance but also
reviews and undertakes a critical appraisal of
companies policies and procedures.
• It is focussed in maximizing organisational
effectiveness.
• It evaluates companies internal controls along with
its corporate governance and accounting processes.
• According to ICAI
• “Internal Audit is an independent management function
which involves a continuous and critical appraisal of the
function of the entity”

10. Scope of Internal Audit
• Internal audit can be used to safeguard the assets of
an organization.
• It helps in monitoring the Internal control of the
organization by reviewing controls, monitoring their
operation and recommending improvements.
• It helps in review of Operating Activities through
reviewing the economy, efficiency and effectiveness
and operating activities.
• It helps in the management of Risk by identifying and
evaluating significant exposures to risk.
• It helps in economical and efficient use of resources.

11. Objectives of Internal Audit
• To verify the correctness, accuracy and authenticity
of the financial accounting and statistical records
presented to the management.
• To facilitate the early detection of frauds and to
prevent it. To examine the protection afforded to
company's assets and use of them for business
purpose.
• To identify the authorities responsible for purchasing
assets and other items as well as disposal of assets.
• To ensure that the accounting practices which have
to be followed by the organization are strictly
followed.