What is internal control?
It is the system of checks and balances to ensure the company’s financial records are accurate and reliable being the result of transactions that are carried out and recorded timeously, accurately and efficiently.
The effectiveness of internal controls is dependent on management’s attitude towards controls.
Indications of a strong internal control environment
Employees possess the necessary skills and competence required
Recruitment agencies or HR checks and verify the details in CVs properly.
Proper inhouse training to staff
Clear roles and responsibilities
Separation of duties are in place between functions of initiation, authorization, recording and reviewing.
Monitoring of staff performance
Strong document controls include:
Easy to understand designed forms
Sequentially pre-numbered documents to be able to track, record and reconcile documents.
Orders and Invoices approved by management
Payments approved by management
Physical verification and inspections are performed
Supporting documents accompany orders and deliveries
Information on documents comply with VAT requirements
Documents are filed regularly and in a logical manner
Strong Accounting and Admin controls include:
Reconciliations between accounting records and source documents – bank accounts, supplier statements, customer statements.
Overall review done by management.
Statutory requirements such as VAT returns, Payroll returns, Tax returns reviewed by management.
Filing are done in a logical manner i.e. monthly file for expenses and income.
