Accounting firm Pretoria

Back to basics: Internal Controls

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.