“Internal control comprises the plan of organization and all of the co-ordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of accounting data, promote operational efficiency and encourage adherence to prescribed managerial policies.” But, now, the definition has been revised and divided into two parts – Administrative Controls and Accounting Controls as given below: Administrative Control includes, but is not limited to, the plan of organization and the procedures and records that are concerned with the decision processes leading to management’s authorization of transactions. Such authorization is a management function directly associated with the responsibility for achieving the objectives of the organization and is the starting point for establishing accounting control of transactions.
Accounting Control comprises the plan of organization and the procedures and records that are concerned with the safeguarding of assets. In internal audit, a separate salaried staff of internal auditors is engaged to carry on the independent appraisal of activities within a business. Their job is to audit the financial records and operations from time to time. But in internal check, there is no separate staff appointed especially for this purpose.
Different clerks of a business are allocated their assignments with which they proceed and carry on checking at the same time. In internal audit the work of a clerk is checked by an internal auditor after the former has finished the work while in the case of internal check, the work is so distributed that the work of one clerk is automatically and independently checked by another simultaneously. The management adopts the system of internal audit to ensure that the existing system of internal control is adequate and effective; that the financial records reveal the results of business operations and transactions correctly and all the units of the organization follow the policies and practices framed and lay down by the management. Thus, the system of internal check is a device for doing work while internal audit is expected to check it in the light of policies and procedures laid down by the management.