Page 83 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
Auditor Responsibility:
• Shall obtain understanding of how entity maintains controls.
Ways of Monitoring: Management accomplishes monitoring of controls through:
• ongoing activities
• separate evaluations
• combination of the above two
• using information from communications from external parties. (such as customer complaints and regulator
comments)
In case of Small Entities:
• monitoring of control is often accomplished by close involvement in operations by the – management or
the owner/manager.
• to identify
o Significant variations from expectations
o Inaccurate Financial Data
o Performing remedial actions

(CNO-MRI.480) Internal Check System
I.Overall Systems
The overall systems of internal control comprise of/ constituents of
• Administrative Control
• Accounting Controls,
• Internal Checks
• Internal Audit
II.Internal Check
• Internal check system organizes the bookkeeping system and staff duties.
• It prevents a single person from completing and recording all aspects of a transaction.
• It is a part of the overall control system and functions as a built-in device for organizational and job
allocation aspects.
• The system incorporates checks on daily transactions that operate continuously.
• Each person's work is independently verified or made complementary to the work of another as part of
the routine system.
III.Objectives
• To avoid and minimize the possibility of commission of errors and fraud by any staff.
• To prevent and avoid the misappropriation or embezzlement of cash and falsification of accounts.
• To detect error and frauds with ease.
• To increase the efficiency of the staff working within the organization.
• To locate the responsibility area or the stages where actual fraud and error occurs.
• To protect the integrity of the business by ensuring that accounts are always subject to proper scrutiny and
check.
IV.General Implementation of Internal Check System
The general condition pertaining to the internal check system may be summarized as under:

(First Few points are related to System Designing Points)

(Shortcut: Independent Military & NDA)

• Independent Accounting Control: There should exist an accounting control in respect of each class of
assets, in addition, there should be periodical inspection so as to establish their physical condition.

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