It is an auditor’s duty to verify that the company complies with all laws and regulations applicable on the company, even if an auditor finds internal check system of a company is efficient it does not relieve auditor from his responsibilities.
An external and statutory auditor is finally responsible for any mistake in final statements and accounts. Auditor should always suggest how weakness of company can be eliminated.
Internal check as regards
- Cash receipts should be handled by a separate clerk called cashier.
- Cashier should record the receipts immediately.
- Automatic bills are useful for checking receipts.
- He should not be allowed to keep cash for his personal use.
- He should also not be allowed to do any personal expenditure from the company’s cash.
- In case of any payment done, a receipt should be obtained.
- For petty cash payments, a petty cashier should be appointed instead of main cashier.
- Balance confirmation should be done from creditors.
- Payment should be made by cheques or net banking, if not petty.
- The name and status of the person signing cheque should be decided beforehand.
- Cash payment and receipt should be checked by the cashier frequently.
- In the case of many counters, separate salesmen should be appointed to carry out cash sales.
- Invoice copies should be proper and four copies of cash receipt should be made. One to be given to cashier, another to the gatekeeper, one to the customer himself and one for the company’s salesman.
- Sales summaries should also be made in three copies, for the salesman, customer, and cashier.
- All-cash sales should be deposited to the bank on an everyday basis.
- Cash received should be reconciled every day with a cash deposit.
Sales by Travelling salesman
- Sales man should contain rough cash receipt book, which should be serially indexed, in cash of any advance from customers, same shall be given.
- Final sales invoice should be given to customers and one copy to be kept by salesman.
- Salesman should at the end of the day deposit cash in the head office.
- Reconciliation should be made on regular basis.
- Salesman should be transferred to different areas to avoid any fraud.
- For purchasing, a requisition slip should be filled mentioning particulars of quantity, quality and delivery date.
- Payment to be made to supplier instantly or during the due date given.
- Purchase invoice and stocks to be checked on regular basis.
- In case of any return or any discrepancy, debit note to be issued to the supplier.
- Sales order, once received it should be forwarded to the dispatch department.
- It should be the responsibility of dispatch department to pack the material accordingly.
- Verification of invoices to be done according to the orders dispatched.
- Entry of sales to be made on daily basis.
- Sales return by the customer if any should be recorded instantly.
- Every store must be in a convenient location easily be identified by the customer.
- Stores must be equipped with inventory and proper assets.
- Goods should be stored properly, maintain quality without any damage. Proper accounting should be done on receipt or dispatching goods.
- Goods Receipt Copy (GRN) should be maintained, one with the purchase department, other with accounts department and one with the store itself.
- Purchase of fixed assets should be properly recorded in the accounts.
- Physical verification of fixed assets should be done timely.
- Depreciation should be done according to AS-10 every year.
- Capital expenditure and Revenue Expenditure should be segregated and recorded profusely.
- Investment decisions to be done by authorised person only.
- Sales and purchase of investment should be maintained in register form and recorded on daily basis.
- Verification of investment in physical form should be done periodically.