Audits are important for every organization, not only because of regulatory requirements but also because they help manage internal control. Let’s first understand internal control. The procedures and policies in practice within an organization that are important for carrying forward the accounting and auditing processes are called internal controls.
Maintenance of these controls is essential for keeping the continuous accounting and auditing processes reliable. This very fact underscores the importance of seeking professional help, not just because of regulatory requirements.
This article aims to introduce you to the internal control procedures, which are essential for audits.
Internal Control Procedures Essential for Audits and Accounting
Internal control procedures are essential to managing effectively for successful audits and positive business outcomes. If the records and books of your organization are not accurate and reliable, you will have to deal with those discrepancies at numerous fronts. Your business and sales projections will be inaccurate. The loopholes in policies may lead to malpractices within the organization etc.
Following internal controls ca help carry out audits seamlessly and provide the basis for conducting business without hurdles on the accounting front:
Separation of Duties
In every organization, well-defined duties and responsibilities are an integral part of the policy framework. But sometimes there are too many grey areas. You need to split responsibilities for maintaining books, reporting insights, and auditing of the systems and processes. In order to make sure the accuracy and reliability of accounts that your organization maintains, you need to seek help from one of the top audit firms in Dubai and ensure the separation of duties without compromising the quality of work.
Accounting Access Controls
One of the most important aspects of internal control is access to accounting information. The information, if not secured and kept under a structured framework of authorization, will be prone to misuse. Remember, there is always a threat of black sheep in an organization, and if there is any chance of unauthorized access, you can get in trouble.
Thus, you need to make sure that electronic access is restricted, and auditors can access it through legitimate means for error identification.
Audits of Assets
Keeping an account of physical assets is important, just as you need to keep a check on digital accounts. Physical audits mainly comprise a check on hand-held cash or any other asset which passes through the accounting system, e.g., inventory, tools, and office’s on-premises materials. If there are any discrepancies in the digital and hand-counted cash, an audit of physical assets will lay it bare for the managers to perceive the threat.
Standardization of Documents
Financial documents need to be standardized. These may or may not include the invoices, receipts, internal materials purchases or supply, reports on travel expenses. You need to maintain consistency in all such documents that form a part of financial transactions. When you maintain a standardized format for all such documents, you will have the ease of reviewing and gaining insightful information from them.
There will be fewer chances of discrepancies in the documented books. If you fail to standardize all these documents, you will be highly likely to overlook and/or misinterpret important pieces of information in reviews and analyses.
Trail Balances on a Weekly Basis
You need to get rid of a single entry accounting system if you are still stuck there. Adapting to the new double-entry accounting systems will reap multiple benefits for your organization. The first of these benefits is an increased level of reliability and a higher level of flexibility and in the management system.
The bookkeeping resource will be able to calculate and balance the trials on a weekly or daily basis to provide you insightful information pertinent to business operations.
Accounting Systems Reconciliation
As a business organization, you are not only dealing with your own accounts. You need to reconcile the accounting balance of your company’s accounts with other entities that you are dealing with. This includes a regular comparison of deposit records and cash balances and a comparison of receipts for transactions between a banking system and your company’s accounting system.
Approvals from Authorities
Some transactions are bigger than others and require you to put another layer of scrutiny before going ahead with them. You can designate some managers with this responsibility to approve of a certain kind of transaction so as to keep a check on the black sheep of your organization if any.
Internal Control is Essential for Accounting
A business can simply not run without a proper accounting and auditing function. You need to have a team of accountants in-house or outsource professional from a reputable firm. Outsourced professionals are always better because of their independent judgment and lack of tendencies of impartiality.
Just make sure that you do not solely rely on audit for the regulatory requirement but also for maintaining internal control and enhancing corporate governance in your organization.