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Discuss various types of internal control in auditing.

      


Discuss various types of internal control in auditing.

  

Answers


Judy
Organization: Enterprises should have a plan of their organization defining and allocating responsibilities and identifies lines of reporting for all aspects of the enterprises’ operation, including the controls. The delegation of authority and responsibility should be clearly specified. Segregation of duties: One of the prime means of control is the separation of those responsibilities or duties which would if combined enable one individual to record and process a complete transaction. Segregation reduces the risk of intentional manipulation and error and increases the element of checking. Functions which should be separated include those of authorization, execution, custody, recording and in the case of a computer based accounting system, systems development and daily operations.
Physical: These are concerned mainly with the custody of assets and involve procedures and security measures designed to ensure that access to assets is limited to authorised personnel. This includes both direct access and indirect access through documentation. These controls assume importance in the case of valuable, portable, exchangeable or desirable assets.
Authorization and approval: All transactions should require authorization or approval by an appropriate responsible person. The limits for this authorization should be specified.
Arithmetical and accounting: These are the controls within the recording function which check that the transactions to be recorded and processed have been authorized, that they are all included and that they are correctly recorded and accurately processed. Such controls include: the checking of the arithmetical accuracy of the records, the maintenance and checking of totals, reconciliations, control accounts and trial balances and accounting for documents.
Personnel: There should be procedures to ensure that personnel have capabilities commensurate with their responsibilities. Inevitably, the proper functioning of any system depends on the competence and integrity of those operating it. The qualifications, selection and training as well as the innate personal characteristics of the personnel involved are important features to be considered in setting up any control system.
Supervision: Any system of internal control should include the supervision by responsible officials of day to day transactions and the recording thereof.
Management controls: These are the controls exercised by the management outside the day to day routine of the system. They include: the overall supervisory controls, exercised by management, the review of management accounts, and comparison thereof with budgets, the internal audit functions and any special review procedures.
Judiesiz answered the question on August 15, 2018 at 03:55


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