Internal Control

Internal Control Practices
A bullet point summary of the internal controls you would typically expect in the following areas

Purpose of Internal Control
• To promote orderly, economical, efficient and effective operations and to produce quality products and services consistent with the organization’s mission
• To safeguard resources against loss due to waste, abuse, mismanagement, errors and fraud
• To ensure adherence to laws, regulations, contracts and management directive, and
To develop and maintain reliable financial and management data, and to accurately present that data in timely reports

Internal Control for Cash Management
• The entity maintains records of payments on accounts by customers
• Cash receipts are deposited intact and in separate bank accounts when required
• People who handle cash are adequately bonded
• Someone other than the person responsible for maintain account receivable opens the mail and lists the cash receipts
• Cash are posted to general ledger on a timely basis
• Standard journal entries are used to post cash receipts
• The people who enter cash receipts to the accounting system are independent of the physical handling of collections
• Timely bank reconciliations are prepared or reviewed by someone independent of the cash management function

Internal Control for Cash Disbursements
• Initiating cash disbursements
- All disbursements except those from petty cash are made by check
- All checks are recorded
- Supporting documentation such as invoices and receiving reports are reviewed before the checks are signed
- Supporting documents are canceled to avoiding duplicate payment
• Processing cash disbursements
- Cash disbursements are posted to the general ledger on a timely basis
- Cash disbursements are posted to accounts payable subsidiary ledger on a timely basis
- Standard journal entries are used to post cash disbursements
- Timely bank reconciliations are prepared or reviewed by the owner or manger...