Advantages of Internal Check System

Advantages of Internal Check System

Advantages of Internal Check System

Internal Check is an arrangement of staff duties of a business in such a way that work is automatically checked by the next staff while performing their duties. It is a system or method introduced with defined instructions given to staff as to their sphere of work with a view to controlling and verification of their work and also maintenance of accurate records as the ultimate aim.

Some of the broadly established advantages of an efficient system of an internal check are as follows. Internal check system is used to the number of parties which are as follows:

(a) Advantages to an Auditor

If the internal check system is effective, an auditor can apply test checks rather than checking the books of accounts in detail. He can select a limited sample of transactions. So, an auditor can save his time and labor which simultaneously saves the cost. This enables him to finish the audit work within time.

  1. Quick preparation of final accounts: The Profit and Loss Account and the Balance Sheet are organized without any loss of time.
  2. Convenience to Auditor: Where an organization is an operating system internal check, the statutory auditor may easily pass up a thorough checking of the transactions.

(b) Advantages to Businessman – Following advantages can be achieved by the businessperson from internal check system:

  • Internal check detects errors and frauds which increase the morale of honest staffs. It helps to increase productivity and reduce costs. So, it helps to increase sales ax profitability.
  • Staffs know the real position of the business. So, it helps to maintain a good relationship between staff and managers.
  • The internal check system assures the owners of the accuracy and reliability of books of accounts.
  • Overall competence and economy in operations result in more profit – thus ensuring larger dividends for the owners or shareholders.

(c) Advantages of Business: An internal check system is beneficial to the business also. So, the advantages which can be achieved by the business are as follow –

  • Right, responsibility and duties of staff are clearly defined under the internal check system. So., they perform work wholeheartedly which reduces the chances of errors and frauds and increases profit. This helps in the early exposure and discovery of errors and frauds and the possibilities of the commission of errors and frauds can be minimized.
  • The internal check system is based on the principle of division of labor. So, the work of a business can be completed easily at minimum cost. Proper allocation of work among the members of staff of the enterprises keeping in view their individual area of specialization.
  • The work of every staff is checked automatically. So, the staffs remain honest which increases the profitability of a business. Knowledge of the following checking of each employee’s work by others acts as an immense check to the commission of errors and frauds.
  • Every book of accounts remains correct, so the final account can be prepared in less time, cost, and labor.
  • A good system of internal check augment the competence of work among the staff and leads to the whole economy.

Share This Post