Internal Control System

Lecture note on monitoring business and accounting systems.
-------------------------------------------------
internal control systems and internal controls
An internal control system is the whole system of controls, financial and otherwise, established by the management in order to * Carry on the business of the enterprise in an orderly and efficient manner, * Ensure adherence to management policies, * Safeguard the assets and secure as far as possible the completeness and accuracy of the records. * Ensure that the enterprise maintains complete and accurate records.
Types of internal control
 is based on * Operational efficiency * Adherence to management policies.
These controls will emphasise statistical analysis performance reports, quality control, employee training programmes and so on.
is based on * Safeguarding of assets, * The reliability of financial records.
These controls include systems of authorisation and approval, separation of duties concerned with asset custody, physical controls over assets and internal auditing.
Eight types of control
S
egregation of duties: Separation of responsibilities so that no one person can fully record and process a transaction. Segregation of duties reduces the risk of intentional manipulation or error and increases the element of checking.

P hysical control requires access to assets is limited to authorised personnel. Such control include locks, safe and entry codes.

A uthorisation and approval: All transactions should be authorised or approved by an appropriate responsible person. The limits for these authorisations should be specified.
M
anagement controls are exercised by management outside the day to day routine of the system. Overall supervisory control
Review of management accounts and comparison within budgets
Internal audit function
Special review procedure
S
upervisory control: Any system of internal