Question

 

Discuss the meaning of “internal control” in the context of accounting. Then share five examples of internal control procedures designed to prevent fraud and accidental accounting errors.

Answer 1

Internal control in the context of accounting: Internal control is a process to assure that an organization is operating in an effective manner and to make sure uses of resources in an efficient manner to achieve its objectives ,reliable financial reporting and compliance with laws and regulations.

Following are the examples to Internal control procedure designed to prevent fraud and accidental accounting errors:

1-Separation of Duties: No single duty should be allotted to one employee. There should be frequent changes in different responsibilities for book keeping ,reporting, deposits etc.

2-Physical audit of Assets: Audit of Assets such as cash counting and stock calculation should be done physically.

3-Periodic reconciliation in Accounting system to ensure that balance in your accounting system is matching with balance in accounts held by other entity such as bank debtors , creditors .

4-Approval requirement: Certain Transaction should be approve by appropriate authority to ensure that transaction have been seen ,analyzed and approved by appropriate authorities.

5-Accounting system access control should be there such as password so that unauthorized users can not access system.