Internal Control

Internal control

an accounting procedure established to promote efficiency, assure the implementation of a policy and safeguard assets to avoid fraud and error

Principles of Internal Control

1. Establishment of Responsibility
2. Segregation of Duties
3. Documentation Procedures
4. Physical, mechanical and electronic controls
5. Independent internal verification

Importance of Segregation of Duties

One person should not do everything, the duties should be segregated so that there is a lower possibility of committing fraud

Importance of Rotation of Duties

So that it is difficult to commit fraud and ensure that the fraud remains hidden

Profile of a fraudster

Perpetual presence in the office - indication of their fear of being caught

Limitations of internal control

1. Cost of implementation should not exceed the expected benefit
2. Human element can still play a role even if auditing is done by an independent auditor - fatigue, carelessness & indifference
3. Collusion
4. Size of business