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INTERNAL CONTROLS

CHECKLIST
General Accounting
Controls
1. Chart of accounts
1. Accounting procedures
manual
2. Organizational chart to
define responsibilities
3. Absence of entries direct
to ledgers
4. Posting references in
ledgers
5. Review of journal entries
6. Use of standard journal
entries
7. Use of prenumbered
forms
8. Support for all journal
entries
9. Access to records limited
to authorized persons
10.Rotation of accounting
personnel
11.Required vacations
12.Review of system at
every level
13.Appropriate revision of
chart of accounts
14.Appropriate revision of
procedures
15.Separation of
recordkeeping from
operations
16.Separation of
recordkeeping from

Yes

No

N/A

Comments

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INTERNAL CONTROLS
CHECKLIST

custodianship
17.Record retention policy
18.Bonding of employees
19.A conflict of interest
policy

Cash Funds Controls

Yes

No

N/A

Comments

1. Imprest system
1. Reasonable amount
2. Completeness of
vouchers
3. Custodian responsible for
fund
4. Reimbursement checks
to order of custodian
5. Surprise audits
6. No employee check
cashing
7. Physically secure
8. Custodian has no access
to cash receipts
9. Custodian has no access
to accounting records

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Cash Receipts Controls

Yes

INTERNAL CONTROLS
CHECKLIST
No

N/A

Comments

1. Detail listing of mail


receipts
1. Restrictive endorsement of
checks
2. Special handling of
postdated checks
3. Daily deposit
4. Cash custodians bonded
5. Cash custodians apart from
negotiable instruments
6. Bank accounts properly
authorized
7. Handling of returned NSF
items
8. Comparison of duplicate
deposit slips with cash book
9. Comparison of duplicate
deposit slips with detail A/R
10.Banks instructed not to
cash checks to company
11.Control over cash from
other sources
12.Separation of cashier
personnel from accounting
duties
13.Separation of cashier
personnel from credit
duties
14.Use of cash registers
15.Cash register tapes
16.Numbered cash receipt
tickets
17.Outside salesmen cash
control
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18.Daily reconciliation of cash


collections

INTERNAL CONTROLS
CHECKLIST

Cash Disbursement Controls

Yes

No

N/A

Comments

1. Numbered checks
1. Sufficient support for checks
2. Limited authorization to sign checks
3. No signing of blank checks
4. All checks accounted for
5. Detailed listing of checks
6. Mutilation of voided checks
7. Specific approval of unusually large checks
8. Proper authorization of persons signing
checks
9. Control over signature machines
10.Check listing compared to cash book
11.Control over interbank transfers
12.Prompt accounting for interbank transfers
13.Checks not payable to cash
14.Physical control of unused checks
15.Cancellation of supporting documents
16.Control over long outstanding checks
17.Reconciliation of bank account
18.Independence of person reconciling bank
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INTERNAL CONTROLS
CHECKLIST

statement
19.Bank statement direct to person reconciling
20.No access to cash records or receipts by
check signers

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INTERNAL CONTROLS
CHECKLIST
Investments Controls

Yes

No

N/A

Comments

1. Proper authorization of
transactions
1. Under control of a custodian
2. Custodian bonded
3. Custodian separate from
cash receipts
4. Custodian separate from
investment records
5. Safety deposit box
6. Record of all safety deposit
visits
7. Access limited
8. Presence of two required for
access
9. Periodic reconciliation of
detail with control
10.Record of all aspects of all
securities
11.Availability of brokerage
advices, etc.
12.Periodic internal audit
13.Securities in name of
company
14.Proper segregation of
collateral
15.Physical control of collateral
16.Periodic appraisal of
collateral
17.Periodic appraisal of
investments
18.Adequate records of
investments for application
of equity method

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INTERNAL CONTROLS
CHECKLIST
Accounts Receivable and Sales Controls

Yes

No

N/A

Comments

1. Sales orders prenumbered


1. Credit approval
2. Credit and sales departments independent
3. Control of back orders
4. Sales order and sales invoice comparison
5. Shipping invoices prenumbered
6. Names and addresses on shipping invoice
7. Review of sales invoices
8. Control over returned merchandise
9. Credit memoranda prenumbered
10.Matching of credit memoranda and
receiving reports
11.Control over credit memoranda
12.Control over scrap sales
13.Control over sales to employees
14.Control over C.O.D. sales
15.Sales reconciled with cash receipts and A/R
16.Sales reconciled with inventory change
17.A/R statement to all customers
18.Periodic preparation of aging schedule
19.Control over collections of written-off
receivables
20.Control over A/R write off, e.g., proper
authorization
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INTERNAL CONTROLS
CHECKLIST

21.Control over A/R written off, i.e., review for


possible collection
22.Independence of sales, A/R, receipts,
billing and shipping personnel

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Notes Receivable Controls

INTERNAL CONTROLS
CHECKLIST
Yes

No

N/A

Comments

1. Proper authorization of notes


1. Detailed records of notes
2. Periodic detail to control comparison
3. Periodic confirmation with makers
4. Control over notes discounted
5. Control over delinquent notes
6. Physical safety of notes
7. Periodic count of notes
8. Control over collateral
9. Control over revenue from notes
10.Custodian of notes independent from cash
and recordkeeping

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Inventory and Cost of Sales Controls

INTERNAL CONTROLS
CHECKLIST
Yes

No

N/A

Comments

1.
1.
2.
3.
4.
5.
6.

Periodic inventory counts


Written inventory instructions
Counts by noncustodians
Control over count tags
Control over inventory adjustments
Use of perpetual records
Periodic comparison of G/L and perpetual
records
7. Investigation of discrepancies
8. Control over consignment inventory
9. Control over inventory stored at
warehouses
10.Control over returnable containers left with
customers
11.Preparation of receiving reports
12.Prenumbered receiving reports
13.Receiving reports in numerical order
14.Independence of custodian from
recordkeeping
15.Adequacy of insurance
16.Physical safeguards against theft
17.Physical safeguards against fire
18.Adequacy of cost system
19.Cost system tied into general ledger
20.Periodic review of overhead rates
21.Use of standard costs
22.Use of inventory requisitions
23.Periodic summaries of inventory usage
24.Control over intracompany inventory
transfers
25.Purchase orders prenumbered
26.Proper authorization for purchases
27.Review of open purchase orders

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10

INTERNAL CONTROLS
CHECKLIST
Prepaid Expenses and Deferred Charges

Yes

No

N/A

Comments

Yes

No

N/A

Comments

1. Proper authorization to incur


1. Authorization and support of amortization
2. Detailed records
3. Periodic review of amortization policy
4. Control over insurance policies
5. Periodic review of insurance needs
6. Control over premium refunds
7. Beneficiaries of company policies
8. Physical control of policies
Intangibles Controls
1. Authorization to incur
1. Detailed records
2. Authorization to amortize
3. Periodic review of amortization

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11

Fixed Assets Controls

INTERNAL CONTROLS
CHECKLIST
Yes

No

N/A

Comments

1. Detailed property records


1. Periodic comparison with control accounts
2. Proper authorization for acquisitions
3. Written policies for acquisition
4. Control over expenditures for selfconstruction
5. Use of work orders
6. Individual asset identification plates
7. Written authorization for sale
8. Written authorization for retirement
9. Physical safeguard from theft
10.Control over fully depreciated assets
11.Written capitalization--expense policies
12.Responsibilities charged for asset and
depreciation records
13.Written, detailed depreciation records
14.Depreciation adjustments for sales and
retirements
15.Control over intracompany transfers
16.Adequacy of insurance
17.Control over returnable containers

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12

Accounts Payable Controls

INTERNAL CONTROLS
CHECKLIST
Yes

No

N/A

Comments

Yes

No

N/A

Comments

1. Designation of responsibility
1. Independence of A/P personnel from
purchasing, cashier, receiving functions
2. Periodic comparison of detail and control
3. Control over purchase returns
4. Clerical accuracy of vendors invoices
5. Matching of purchase order, receiving
report and vendor invoice
6. Reconciliation of vendor statements with
A/P detail
7. Control over debit memos
8. Control over advance payments
9. Review of unmatched receiving reports
10.Mutilation of supporting documents at
payment
11.Review of debit balances
12.Investigation of discounts not taken
Accrued Liabilities and Other Expenses
Controls
1. Proper authorization for expenditure and
incurrence
1. Control over partial deliveries
2. Postage meter
3. Purchasing department
4. Bids from vendors
5. Verification of invoices
6. Imprest cash account
7. Detailed records
8. Responsibility charged
9. Independence from G/L and cashier
functions
10.Periodic comparison with budget

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13

INTERNAL CONTROLS
CHECKLIST

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14

Payroll Controls

INTERNAL CONTROLS
CHECKLIST
Yes

No

N/A

Comments

Yes

No

N/A

Comments

1. Authorization to employ
1. Personnel data records
2. Tax records
3. Time clock
4. Supervisor review of time cards
5. Review of payroll calculations
6. Comparison of time cards to job sheets
7. Imprest payroll account
8. Responsibility for payroll records
9. Compliance with labor statutes
10.Distribution of payroll checks
11.Control over unclaimed wages
12.Profit sharing authorization
13.Responsibility for profit sharing
computations

Long-Term Liabilities Controls


1.
1.
2.
3.
4.
5.
6.
7.
8.
9.

Authorization to incur
Executed in company name
Detailed records of long-term debt
Reports of independent transfer agent
Reports of independent registrar
Otherwise adequate records of creditors
Control over unissued instruments
Signers independent of each other
Adequacy of records of collateral
Periodic review of debt agreement
compliance
10.Recordkeeping of detachable warrants
11.Recordkeeping of conversion features

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15

Shareholders Equity Controls

INTERNAL CONTROLS
CHECKLIST
Yes

No

N/A

Comments

1. Use of registrar
1. Use of transfer agent
2. Adequacy of detailed records
3. Comparison of transfer agents report
with records
4. Physical control over blank certificates
5. Physical control over treasury certificates
6. Authorization for transactions
7. Tax stamp compliance for canceled
certificates
8. Independent dividend agent
9. Imprest dividend account
10.Periodic reconciliation of dividend account
11.Adequacy of stockholders ledger
12.Review of stock restrictions and provisions
13.Valuation procedures for stock issuances
14.Other paid-in capital entries
15.Other retained earnings entries

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