types of internal controls

7/30/2019 Types of Internal Controls

1/12

TYPES OF INTERNAL CONTROLSChecklist Sorted by Functional Area

General Controls Yes No N/A Comments

1. Chart of accounts

2. Accounting procedures manual

3. Organizational chart to define responsibilities4. Absence of entries direct to ledgers

5. Posting references in ledgers

6. Review of journal entries

7. Use of standard journal entries

8. Use of prenumbered forms

9. Support for all journal entries

10.Access to records limited to authorized persons

11.Rotation of accounting personnel

12.Required vacations

13.Review of system at every level

14.Appropriate revision of chart of accounts

15.Appropriate revision of procedures

16.Separation of recordkeeping from operations

17.Separation of recordkeeping from custodianship

18.Record retention policy

19.Bonding of employees

20.A conflict of interest policy

Cash Funds Controls Yes No N/A Comments

1. Imprest system

2. Reasonable amount

3. Completeness of vouchers

4. Custodian responsible for fund

5. Reimbursement checks to order of custodian

6. Surprise audits

7. No employee check cashing

8. Physically secure

9. Custodian has no access to cash receipts

10.Custodian has no access to accounting records

1Source: Protiviti KnowledgeLeader http://www.knowledgeleader.com


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Cash Receipts Controls Yes No N/A Comments

1. Detail listing of mail receipts

2. Restrictive endorsement of checks

3. Special handling of postdated checks4. Daily deposit

5. Cash custodians bonded

6. Cash custodians apart from negotiableinstruments

7. Bank accounts properly authorized

8. Handling of returned NSF items

9. Comparison of duplicate deposit slips with cashbook

10.Comparison of duplicate deposit slips with detailA/R

11.Banks instructed not to cash checks to company

12.Control over cash from other sources

13.Separation of cashier personnel from accountingduties

14.Separation of cashier personnel from creditduties

15.Use of cash registers

16.Cash register tapes

17.Numbered cash receipt tickets

18.Outside salesmen cash control

19.Daily reconciliation of cash collections



3/12


Cash Disbursements Controls Yes No N/A Comments

1. Numbered checks

2. Sufficient support for checks

3. Limited authorization to sign checks4. No signing of blank checks

5. All checks accounted for

6. Detail listing of checks

7. Mutilation of voided checks

8. Specific approval of unusually large checks

9. Proper authorization of persons signing checks

10.Control over signature machines

11.Check listing compared to cash book

12.Control over interbank transfers

13.Prompt accounting for interbank transfers

14.Checks not payable to cash

15.Physical control of unused checks

16.Cancellation of supporting documents

17.Control over long outstanding checks

18.Reconciliation of bank account

19.Independence of person reconciling bankstatement

20.Bank statement direct to person reconciling

21.No access to cash records or receipts by checksigners



4/12


Investments Controls Yes No N/A Comments

1. Proper authorization of transactions

2. Under control of a custodian

3. Custodian bonded4. Custodian separate from cash receipts

5. Custodian separate from investment records

6. Safety deposit box

7. Record of all safety deposit visits

8. Access limited

9. Presence of two required for access

10.Periodic reconciliation of detail with control

11.Record of all aspects of all securities

12.Availability of brokerage advices, etc.

13.Periodic internal audit

14.Securities in name of company

15.Proper segregation of collateral

16.Physical control of collateral

17.Periodic appraisal of collateral

18.Periodic appraisal of investments

19.Adequate records of investments for applicationof equity method



5/12


Accounts Receivable and Sales Controls Yes No N/A Comments

1. Sales orders prenumbered

2. Credit approval

3. Credit and sales departments independent4. Control of back orders

5. Sales order and sales invoice comparison

6. Shipping invoices prenumbered

7. Names and addresses on shipping invoice

8. Review of sales invoices

9. Control over returned merchandise

10.Credit memoranda prenumbered

11.Matching of credit memoranda and receivingreports

12.Control over credit memoranda

13.Control over scrap sales

14.Control over sales to employees

15.Control over C.O.D. sales

16.Sales reconciled with cash receipts and A/R

17.Sales reconciled with inventory change

18.A/R statement to all customers

19.Periodic preparation of aging schedule

20.Control over collections of written-off receivables

21.Control over A/R write off, e.g., properauthorization

22.Control over A/R written off, i.e., review forpossible collection

23.Independence of sales, A/R, receipts, billing, andshipping personnel



6/12


Notes Receivable Controls Yes No N/A Comments

1. Proper authorization of notes

2. Detailed records of notes

3. Periodic detail to control comparison4. Periodic confirmation with makers

5. Control over notes discounted

6. Control over delinquent notes

7. Physical safety of notes

8. Periodic count of notes

9. Control over collateral

10.Control over revenue from notes

11.Custodian of notes independent from cash andrecordkeeping



7/12


Inventory and Cost of Sales Controls Yes No N/A Comments

1. Periodic inventory counts

2. Written inventory instructions

3. Counts by noncustodians4. Control over count tags

5. Control over inventory adjustments

6. Use of perpetual records

7. Periodic comparison of G/L and perpetual records

8. Investigation of discrepancies

9. Control over consignment inventory

10.Control over inventory stored at warehouses

11.Control over returnable containers left withcustomers

12.Preparation of receiving reports

13.Prenumbered receiving reports

14.Receiving reports in numerical order

15.Independence of custodian from recordkeeping

16.Adequacy of insurance

17.Physical safeguards against theft

18.Physical safeguards against fire

19.Adequacy of cost system

20.Cost system tied into general ledger

21.Periodic review of overhead rates

22.Use of standard costs

23.Use of inventory requisitions24.Periodic summaries of inventory usage

25.Control over intracompany inventory transfers

26.Purchase orders prenumbered

27.Proper authorization for purchases

28.Review of open purchase orders



8/12


Prepaid Expenses and Deferred Charges Yes No N/A Comments

1. Proper authorization to incur

2. Authorization and support of amortization

3. Detailed records4. Periodic review of amortization policy

5. Control over insurance policies

6. Periodic review of insurance needs

7. Control over premium refunds

8. Beneficiaries of company policies

9. Physical control of policies

Intangibles Controls Yes No N/A Comments

1. Authorization to incur

2. Detailed records

3. Authorization to amortize

4. Periodic review of amortization



9/12


Fixed Assets Controls Yes No N/A Comments

1. Detailed property records

2. Periodic comparison with control accounts

3. Proper authorization for acquisitions

4. Written policies for acquisition

5. Control over expenditures for self-construction

6. Use of work orders

7. Individual asset identification plates

8. Written authorization for sale

9. Written authorization for retirement

10.Physical safeguard from theft

11.Control over fully depreciated assets

12.Written capitalization--expense policies

13.Responsibilities charged for asset anddepreciation records

14.Written, detailed depreciation records

15.Depreciation adjustments for sales andretirements

16.Control over intracompany transfers

17.Adequacy of insurance

18.Control over returnable containers



10/12


Accounts Payable Controls Yes No N/A Comments

1. Designation of responsibility

2. Independence of A/P personnel from purchasing,cashier, receiving functions

3. Periodic comparison of detail and control

4. Control over purchase returns

5. Clerical accuracy of vendors invoices

6. Matching of purchase order, receiving report, andvendor invoice

7. Reconciliation of vendor statements with A/Pdetail

8. Control over debit memos

9. Control over advance payments

10.Review of unmatched receiving reports

11.Mutilation of supporting documents at payment12.Review of debit balances

13.Investigation of discounts not taken

Accrued Liabilities and Other ExpensesControls

Yes No N/A Comments

1. Proper authorization for expenditure andincurrence

2. Control over partial deliveries

3. Postage meter

4. Purchasing department5. Bids from vendors

6. Verification of invoices

7. Imprest cash account

8. Detailed records

9. Responsibility charged

10.Independence from G/L and cashier functions

11.Periodic comparison with budget



11/12


Payroll Controls Yes No N/A Comments

1. Authorization to employ

2. Personnel data records

3. Tax records

4. Time clock

5. Supervisor review of time cards

6. Review of payroll calculations

7. Comparison of time cards to job sheets

8. Imprest payroll account

9. Responsibility for payroll records

10.Compliance with labor statutes

11.Distribution of payroll checks

12.Control over unclaimed wages

13.Profit sharing authorization

14.Responsibility for profit sharing computations

Long-Term Liabilities Controls Yes No N/A Comments

1. Authorization to incur

2. Executed in company name

3. Detailed records of long-term debt

4. Reports of independent transfer agent

5. Reports of independent registrar

6. Otherwise adequate records of creditors

7. Control over unissued instruments

8. Signers independent of each other

9. Adequacy of records of collateral

10.Periodic review of debt agreement compliance

11.Recordkeeping of detachable warrants

12.Recordkeeping of conversion features



12/12


Shareholders Equity Controls Yes No N/A Comments

1. Use of registrar

2. Use of transfer agent

3. Adequacy of detailed records

4. Comparison of transfer agents report withrecords

5. Physical control over blank certificates

6. Physical control over treasury certificates

7. Authorization for transactions

8. Tax stamp compliance for canceled certificates

9. Independent dividend agent

10.Imprest dividend account

11.Periodic reconciliation of dividend account

12.Adequacy of stockholders ledger

13.Review of stock restrictions and provisions14.Valuation procedures for stock issuances

15.Other paid-in capital entries

16.Other retained earnings entries


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