Page 97 - CA Final PARAM Digital Book.

purchase function for long period, it is likely that he gets into comfort zone with existing
vendors & hence does not exercise adequate controls in terms of vendor development,
competitive quotes etc.

Delegation of Financial Powers Document: As the organization grows, it needs to delegate
the financial & other powers to their employees. A clearly defined document on delegation
of powers allows controls to be clearly operated without being dependent on individuals.

Information Technology based Controls: With the advent of computers & enterprise
resource planning (ERP) systems, it is much easier to embed controls through the system
instead of being human dependent. The failure rate for IT embedded controls is likely to be
low, is likely to have better audit trail & is thus easier to monitor. For example, at the stage
of customer invoicing, application of correct rates in invoices or credit control can all be
exercised directly through IT system improving control environment.

QNO Flow Chart Technique Old Course – (M04E, N08R, N09E, M13M, SM17, PM17, SM21)
168.000 TITANIUM CNO—MRI.580 New Course – (SM23)

Explain briefly the Flow Chart technique for evaluation of the Internal Control system.
Answer
Flow Chart Technique Few precautions in drawing the flow
chart
A diagram full with lines and symbols 1.Symbols and lines should be proper used.
2.flow-charts should not be lengthy and
It can be used as an effective way of cumbersome,
3.It should be neat,
presenting the state of
internal controls In an organisation 4.Shall portray the flow completely along with
final disposal of papers
Provides a neat visual picture of entire
flow of documents and activities More specifically it can show –
(i) Point at which document is raised-internally
Provides a graphic presentation of or received-external ;
internal controls (ii) Number of copies raised or received;
(iii) Intermediate stages sequentially through
which document and the activity pass;

Shows relevant details in condensed (iv) distribution of the documents to various
sections
but wholly in a meaningful manner (v) checking authorisation and matching at
relevant stages;
It is a Concise and comprehensive way (vi) filing of the documents; and
for reviewing the internal controls and
the evaluator s findings . (vii)final disposal by sending out or destruction.

A flow chart can be of
sales, purchase, wages, production etc.

Purchases linked with sundry creditors and payment

Sales linked with sundry debtors and collections
It will make the flow chart self-contained, complete and
meaningful for evaluation of internal controls
.
Generally, a questionnaire is also enclosed with a flow chart,
incorporating questions, the answers to which are to be
looked into from the flow chart.

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