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Differences and Internal Control System

The document outlines the differences between Internal Check, Internal Audit, and Internal Control System, highlighting their definitions, objectives, scope, responsibilities, and flexibility. It also discusses the advantages of an Internal Control System, such as defect identification and flexibility, alongside its limitations, including human error and cost concerns. Overall, it emphasizes the importance of these systems in maintaining organizational control and efficiency.

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58 views1 page

Differences and Internal Control System

The document outlines the differences between Internal Check, Internal Audit, and Internal Control System, highlighting their definitions, objectives, scope, responsibilities, and flexibility. It also discusses the advantages of an Internal Control System, such as defect identification and flexibility, alongside its limitations, including human error and cost concerns. Overall, it emphasizes the importance of these systems in maintaining organizational control and efficiency.

Uploaded by

ssc
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd

Differences between Internal Check, Internal Audit and Internal Control System

Basis Internal Check Internal Audit Internal Control System


Definition Write down the def given in each chapter
Objective Proper maintenance of Detect error & frauds in Overall organizational
assets of business & accounts of control
maintain accounts organization
correctly
Scope Restricted &part of Internal Control system Much wider activities

Responsibility Rests with accounts Internal auditor Management is solely


office responsible
Flexibility Generally stable for a Definite principles or Easy and flexible.
certain period. procedure is followed
Therefore, less flexible to conduct the work

Advantages of Internal Control System

1. Identification of defects – The total activities are segregated under an Internal Control system
and therefore defects are easily detected.
2. Flexibility – Year wise comparative analysis is done so if there is any change in the mode of
operation or business environment, it can be easily accommodated.
3. Time savings – It saves the time of external auditor as there is no need to prepare separate audit
programme for each and every audit engagement.
4. Lesser risk of omission – As work of one employee is checked by another and principle of
division of labour is followed, there is lesser risk of omission or oversight.
5. Provision for training facility – This system itself provides training facilities to auditors to
overcome any difficulty faced during audit programme.

Disadvantages/Limitations of Internal Control system


1. Chances of human error – The possibility of human error due to carelessness, mistake or
misunderstanding of instructions may make the system ineffective.
2. Cost – In many cases, the cost of internal control is not proportionate to the potential
loss due to error and fraud.
3. Ignorance of unusual activity – Most internal control system is directed towards
anticipated and ordinary activities.
4. Abuse of responsibility – It may happen that the person assigned responsibility for
control abuses his responsibility.
5. Collusion – There maybe possibility of conflict with employees of the entity or with
parties outside the entity.

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