INTERNAL CONTROL CHECKLIST

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INTERNAL CONTROL CHECKLIST
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A. Internal Controls General

1. The company should have an organizational chart.
2. The principal duties of the officers should
   conform to the by-laws.
3. The duties of the principal accounting officer
   should be segregated from those of the treasurer.

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A. Internal Controls General

• The accounting employees and records in all
  locations should be under the supervision of the
  principal accounting officials.
• The company should have an accounting procedures
  manual.
• Accounting reports should be prepared, checked or
  reviewed by departments and individuals other
  than those responsible for the operation reported
  upon.

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A. Internal Controls General

• Journal entries should be approved by an
  appropriate official.
• The company should utilize the control measures
  like (a) standard cost, and (b) comparison of
  budgeted with expenditures.
• Employees who are authorized to review prior
  approvals should be supplied with names and
  specimen signatures of persons authorized to
  approve underlying documents.

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A. Internal Controls General

• The company should have an internal audit staff
  reporting to a senior official.
• The internal audit program should be appropriate
  for the desired objective.
• The internal audit reports should contain
  conclusions, exemptions, recommendations.
• Internal audit reports should be reviewed by
  appropriate official and corrective action
  initiated.

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A. Internal Controls General

• Employees performing accounting and treasury
  functions should be rotated on their jobs and
  required to take vacations and their duties
  performed by others.
• Employees in position of trusts should be
  adequately bonded.
• There should be an assurance that officers and
  employees are not concerned with the other
  businesses with whom the company deals.

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B. Internal Controls Cash General

• Employees handling cash should not journalize and
  post in the general ledgers, subsidiary ledgers
  and other accounting records.
• Bank accounts and check signors should be
  authorized by the board of directors.
• Banks should be notified immediately when
  authority to sign checks of an officer ceases.

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B. Internal Controls Cash General

• All bank accounts should be in the companys name
  and properly controlled and recorded in the books
  of accounts.
• Transfer from one bank to another bank should be
  properly controlled and recorded in the books.

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C. General Controls Checks

• Blank checks should be physically controlled.
• Signing of blank checks should be prohibited.
• Checks should not be made payable to cash or
  bearer.

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C. General Controls Checks

• Checks should be pre-numbered and numerical
  sequence should be accounted for.
• Spoiled checks should be mutilated and preserved.
• If a check-signing machine is in use (a) the
  signature plates should be kept by the check
  signor, and (b) the check signor should see to it
  that checks signed are properly accounted for.

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D. Internal Control- Deposit

• Duplicate deposit slips should be prepared,
  receipted by bank and retained on file.
• Duplicate deposit slips should be compared with
  cash receipts by an employee other than the
  cashier.

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E. Internal Control- Bank Reconciliation

• Bank accounts should be reconciled regularly by
  an employee not handling cash receipts and
  disbursement functions.
• Bank statements, paid checks, bank debit and
  credit memos should be delivered direct to the
  employee reconciling bank accounts.
• Bank reconciliation procedures should include
• comparison of checks with cash disbursement
  records.
• Examination of endorsements, and
• Comparison with ledger balances.

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E. Internal Control- Bank Reconciliation

• An officer not responsible for cash receipts and
  disbursements should review bank reconciliation
  and question unusual reconciling items.
• Deposits and collections items subsequently
  charge back by the bank should go direct to
  someone other than the cashier.
• Cash receipts and disbursements should be
  recorded as soon as received or disbursed.

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F. Internal Controls-Cash on Hand

• Petty cash funds should be maintained on imprest
  basis.
• Primary responsibility for each funds should be
  vested in only one person.
• The petty cash custodian should be independent of
  the cashier and of other employees who handle
  remittances from customers and other cash
  receipts.

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F. Internal Controls-Cash on Hand

• The accounting records should not be accessible
  to the petty cash custodian.
• For all disbursements from the fund there should
  be a corresponding voucher.
• Petty cash vouchers should be written in ink.
• Amount in petty cash vouchers should be in
  figures and words.

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F. Internal Controls-Cash on Hand

• Petty cash vouchers should be approved by
  department heads or some equivalent employees.
• Reimbursement vouchers and supporting petty cash
  vouchers and papers should be cancelled PAID
  immediately after the signing of reimbursement
  check.
• Reimbursement checks should be in the name of
  custodian,

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F. Internal Controls-Cash on Hand

• There should be a surprise count of the fund by
  the internal auditor and other independent
  person.
• The petty cash fund should be limited to the
  requirements for two weeks or less and for petty
  amounts not exceeding a certain fixed amount.
• Papers supporting reimbursement should be
  audited.

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G. Internal Controls Cash Records

• The mail should be opened by someone other than
  the cashier or accounts receivable bookkeeper.
• A list of mail receipts should be prepared by the
  employee opening the mail and given to an
  employee other than the cashier for verification
  of amount recorded and deposited.
• Cash collection should be deposited intact not
  later than the following day.

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G. Internal Controls Cash Records

• Someone other than the cashier and bookkeeper
  should make deposit with bank.
• Authenticated duplicate deposit slips should be
  compared with official receipts and cash
  receipts.
• Bank deposit and credit memos should be delivered
  to an employee other than the cashier.
• Negotiable assets other than currency, checks,
  and drafts should be in the custody of an
  employee other than the cashier.

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G. Internal Controls Cash Records

• The cashier should be responsible for cash
  receipts until they are deposited with the bank.
• All bank accounts should be authorized by the
  board of directors.
• Deposits by branches should be subject to the
  withdrawal only by the home office.
• The cashier should not have access to customers
  ledgers and monthly statement of accounts.

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H. Internal Control Cash Disbursements

• Checks should be pre-numbered and the sequence of
  check number accounted for by the person
  reconciling bank balances.
• Voided checks should be kept in file.
• A check writing machine should be used.

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H. Internal Control Cash Disbursements

• Check signors should not have access to
  accounting records, cash receipts and petty cash
  funds.
• Signing of blank checks and checks payable to
  cash or bearer should be prohibited.
• Transfer from one bank to another should be under
  accounting control.

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H. Internal Control Cash Disbursements

• Bank reconciliation should be prepared by someone
  who has nothing to do with cash and check
  handling and record keeping.
• The employee reconciling bank accounts should
  obtain bank statements, bank paid checks and bank
  debit and credit memos direct from the bank.
• The employee reconciling bank accounts should
  examine bank paid checks as to date, payee,
  amount, signature, endorsements and cancellation.

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H. Internal Control Cash Disbursements

• Supporting data should accompany checks when
  submitted for signature.
• When mechanical check signing is used the
  signature plates should be adequately controlled.
• Cash vouchers and supporting papers should be
  cancelled PAID immediately after signing the
  checks to prevent reuse to support another
  disbursement check.

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I. Internal ControlsNotes Receivable

• There should be periodic confirmation of
  receivables.
• Notes and renewals should be authorized by a
  responsible officer.
• The custodian of the notes should be other than
  the cashier and bookkeeper.
• Negotiable collateral should be under the custody
  of someone other than the cashier and
  bookkeepers.

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J. Internal Controls- Accounts Receivable

• Accounts should be confirmed periodically with
  customers by clients personnel.
• There should be a periodic aging of receivable.
• Disputed items should be handled by other than
  the cashier and bookkeeper.
• Write-offs and adjustments should be approved by
  an officer.

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J. Internal Controls- Accounts Receivable

• Credit memorandum should be numerically
  controlled and approved by an officer.
• Payments for customers credit balances should be
  approved by an officer.
• Monthly statements of accounts should be sent to
  customers.

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J. Internal Controls- Accounts Receivable

• Monthly statement of accounts should be checked
  against accounting records and mailed by other
  than the cashier and bookkeeper.
• List of customers accounts should be reconciled
  periodically with general ledger control account.
• Delinquent accounts should be reviewed
  periodically by an officer.

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J. Internal Controls- Accounts Receivable

• There should be rotations of accounts receivable
  bookkeepers.
• The credit department should be independent of
  the sales department and cash department.
• Written off accounts receivable should be under
  the custody of responsible employee other than
  the cashier and attempts should be made to
  collect from the customers.

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K. Internal Controls-Inventories

• Perpetual inventory system should be in use.
• Purchases should be delivered direct to central
  storage or receiving department.
• The physical goods should be under the custody of
  the storekeeper who should be other than the one
  handling perpetual stock cards.

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K. Internal Controls-Inventories

• There should be physical counts of inventory at
  least once a year as a check on the physical
  goods and perpetual records.
• There should be a written approval by a
  responsible employee for adjustments of perpetual
  records to physical count.
• The inventory system should provide for reporting
  of slow-moving, obsolete and overstocked items.

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K. Internal Controls-Inventories

• There should be proper control over
  consignment-in, consignment-out, materials held
  by processor, material held by client for
  processing and customer merchandise.
• The client should prepare written instructions
  for physical count.
• Accumulation and sale of scrap should be under
  control.

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L. Internal Controls- Investments Securities

• Securities should be kept under lock and key or
  in safe deposit vault.
• More than one person should be present in opening
  the safe deposit box.
• There should be a comparison of actual and
  authorized expenditure.
• The disposal and retirement of plant and
  equipment should be authorized by a responsible
  officer and properly accounted for.

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L. Internal Controls- Investments Securities

• There should be a physical count of plant and
  equipment at least once a year and an appraisal
  for adequacy of insurance coverage.
• The company should have a policy on expenditures
  to be capitalized and on expenditures to be
  charged as expenses.
• There should be a satisfactory system for
  safeguarding small tools.

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M. Internal Controls-Payables

• Borrowings should be authorized by the board of
  directors and sources of funds and officers
  authorized to negotiate should be specifically
  mentioned in the minutes of the meeting.
• Subsidiary ledgers for accounts payable should be
  maintained and regularly reconciled with general
  ledger control.

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M. Internal Controls-Payables

• There should be comparison of suppliers monthly
  statements and clients subsidiary ledgers.
• Adjustments to accounts payable should be
  approved by a responsible officer.
• Debit balances in creditors accounts should be
  handled by the credit department.

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N. Internal Controls-Owners Equity

• If the client does not employ an independent
  transfer agent, the unissued certificates and
  stubs should be under the custody of an officer.
  Surrendered certificates should be effectively
  cancelled. Documentary stamps, should be
  properly attached and cancelled for stock
  issuances.
• If client does not employ an independent dividend
  paying agent, proper control should be exercised
  in preparing mailing and accounting for dividend
  checks.

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O. Internal Controls-Sales

• Customer orders should be reviewed and approved
  by sales or order department and credit
  department.
• Delivery receipts should be pre-numbered.
• Invoices should be checked as to quantities,
  prices, extensions and terms.
• Invoices should be compared with customers
  orders.

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O. Internal Controls-Sales

• Returned items should be cleared through
  receiving department.
• Invoices should be summarized and classified by
  other than the accounting department to provide
  check on recorded sales.
• Sales to employees, COD sales, cash sales and
  sales of scrap should be controlled in the same
  manner as credit sales to customers.
• Units sold should be correlated with purchases
  and inventories.

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P.Internal Controls - Payroll

• Preparation of payroll should be distributed to a
  number of employees and the latter rotated on
  their jobs.
• Time records should be punched in time clocks.
• Changes in rates, additions, and dismissals
  should be properly authorized.
• Time tickets should be checked and compared with
  production schedules and payroll distributions.

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P. Internal Controls - Payroll

• Employees should acknowledge receipt of salaries.
• The paymasters function should be independent of
  the payroll department.
• Unclaimed wages should be deposited in the
  clients bank account immediately after pay day
  and corresponding liability set up.

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Q. Internal Controls Purchases and Expenses

• The purchasing department should be independent
  of accounting, receiving and shipping functions.
• All purchases should be made on purchase orders.
• A copy of the receiving report should go directly
  to the accounting department.
• Purchase orders and receiving reports should be
  pre-numbered.

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Q. Internal Controls Purchases and Expenses

• The accounting department should check purchase
  invoices against purchase orders, receiving
  reports and inspection reports.
• Purchase invoices should be checked as to rising
  extension, footing and freight charges.
• Vouchers should be prepared for all purchases and
  expenses.
• Vouchers for purchases and expenses should be
  examined by responsible officer or employee to
  ascertain completeness of supporting papers and
  approvals.

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