Theory On Control Of Assets

Theory On Control Of Assets

Internal Contols

What are internal controls

Efficient, logical, effective and systematic methods that include checks, reviews put in place by a company to ensure the veracity of financial information, meet operational and profitability goals and broadcast management policies throughout the organization. Internal controls are how a business or organization’s resources are directed, calculated and observed.

Purpose of internal controls

Ensure a business:

• adheres to its policies and plans (Establish Protocols)

• departments achieves all its goals and targets

Helps:

• Promote systematic, inexpensive, proficient and effectual operations.

• Produce quality products and services that agree with the department’s mission.

• Safeguard resources against loss whether it comes due to waste, abuse, errors or fraud.

• Promote obedience to statutes, policies and procedures.

• Create and maintain consistent financial and management data timeously.

Internal Auditor’s Role

Internal auditing is an autonomous, objective assurance and consulting action. Its core role with regard to Effective Risk Management is to provide objective guarantee to the board on the effectiveness of risk management. The two most important ways that internal auditing contributes to the organization are in providing objective and unprejudiced assurance that the major business risks are being managed appropriately and providing assurance that the risk management and internal control framework is operating effectively

The main role of internal auditing is to help the board and its audit committee in releasing its governance responsibilities by delivering:

• An unprejudiced assessment of the existing risk and internal contro...

... middle of paper ...

...ods.

Debtors

Separation of Duties Ensure person screening for debtors is not the same one that’s in charge of receiving/authorizing payments. This ensures that all debtors are actually paying the money and not receiving free goods/services.

Safeguarding Establish a credit policy for time allowed until money is payable.

Screen potential debtors by using credit application forms, obtaining credit reports etc.

Set a credit limit so that debtor doesn’t use more credit than can be paid back.

Ensure write offs are undertaken after an adequate amount of time and that proper comprehensive research has been undertaken.

Documentation Issue invoices and keep duplicates to refer to.

Issue and keep credit note to record allowances.

Recording Ensure duplicate debtors do not exist to make sure that correct and up to date repayment history is recognized.