Steps in the verification of the system of Internal Control

Steps involved in the verification of the system of Internal Control :
(a)  Study  the  system  according  to  which  accounting  routines  are  being  carried  out  to ensure  that  these  do  not  leave  any  receipt  of  cash,  material  or  any  other  asset remaining  unaccounted  for,  permit  any  payment  of  money  being  made  without relevant goods or services having been received or tendered or any property being given away without its price having been received or being accounted for.

(b)  Examine  the  financial  power  vested  in  different  persons  and  the  conditions  under which they can exercise them.

(c)  Confirm whether the supervision over various managerial and accounting functions, exercised  by  different  members  of  the  staff  to  whom  these  duties  have  been assigned, is adequate.

(d)  Ascertain  whether  any  mechanical  aids  are  being  employed  to  ensure  proper accounting of receipts and prevention of pilferage of cash, stamps, etc.

(e)  Observe  the  working  of  the  accounting  system  and  routine  and  determine,  by application  of  procedural  tests,  whether  checks  and  counter-checks  envisaged  by the system of internal control are being properly applied.

(f)  Confirm that there is a system according to which the physical existence of different forms of assets is being periodically reconciled with their balances in the books of account or stores records and discrepancies noticed are reported and adjusted; also that balance of customers, creditors, bankers and persons with whom securities are deposited  are  reconciled  periodically.  Further,  that  persons  who  are  in  custody  of valuable  assets,  have  furnished  bonds  of  adequate  value  which  would  protect  the company  in  the  event  of  any  misappropriation  or  misapplication  thereof  by  such persons.

(g)  Ascertain  that  the  system  of  internal  control  is  reviewed  periodically  and,  where necessary, a change in procedures made to plug in any loopholes which might have been observed on such a review. Also, that policy decisions which are taken from time to time are translated into actual practice.