The essential requirements for success of a business are the implementation of organizational objectives, plans and philosophy. With this end in view, what may be considered as the elements of internal control?

The essential requirements for the success of a business are the implementation of organizational objectives, plans and philosophy. With this end in view the following may be considered as the elements of internal control. Segregation of duties: The division of an operation into a series of sub-operations undertaken by different people, allows for internal checks to take place. Such a control merely reduces the chance of error or irregularity occurring, but it does not eliminate the risk. It reduces the risk of intentional manipulation and error and increases the element of checking. Function which should be separated includes those of authorization, execution, custody, recording and in the case of a computer-based accounting system- systems development and daily operations. Organizational structure: The structure or pattern of an organization will mean system of arrangements and relations as between various levels of personnel for carrying out of plans and policies towards achievement of objectives for which the business stands. Enterprises should have a plan of their organization, defining and allocating responsibilities and identifying lines of reporting for all aspects of the enterprise's operations, including the controls. The delegation of authority and responsibility should be clearly specified. It is important that critical operations are provided with the appropriate status and communications within the organizations. A common cause of irregularity is imbalance between responsibility, status and remuneration. Objectives and Policy Statements: Objectives are the aims, goals, purposes or accomplishments which the top management lay down and expect the staff members to achieve. The functional segments of the company should comply with the policies, plans, procedures, external laws and regulations and the work should be performed in a coordinated manner. Policies and procedures give an indication as to the nature of personnel behavior in their functioning and reflect the attitude of management. Functions of different staff members should be integrated in a manner that is complementary and each acts as check on the other. For instance, wage sheets should be prepared and checked by different set of staff and their disbursement should be in the presence of a responsible official. Authorization and approval: All transactions should require authorization or approval by an appropriate responsible person. The limits of these authorizations should be specified. While designing procedures, provision should be made for proper authorization, to establish full accountability for the actions taken. Personnel: There should be procedures to ensure that personnel have capabilities commensurate with their responsibilities. In fact, the proper functioning of any system depends on the competence and integrity of those operating it. The qualifications, selection and training as well as the innate personal characteristics of the personnel involved are important features to be considered in setting up any control system. Management: Management is responsible for establishing, monitoring and reviewing the systems of internal control. In practice, management may delegate the reviewing function to internal auditor. It is, thus, the duty of internal auditor to provide management with reassurance concerning the efficiency and effectiveness of internal controls. Records and Reports: The accounting and other records should be maintained accurately and adequately so as to assist the management in formulating present and future events in decision making and planning. In order to make reporting effective, it should be timely, tailor-made and present all facts concerning problem areas, assessments etc. Accounting Controls: These are the controls within the recording function which check that the transactions to be recorded and processed have been authorized, and that they are all included and that they are correctly recorded and accurately processed. Such controls include checking the arithmetical accuracy of the records, the maintenance and checking of totals, reconciliations, control accounts and trial balances, and accounting for documents. Protection of assets: These are concerned mainly with the custody of assets and involve procedures and security measures designed to ensure that access to assets is limited to authorized personnel. These include both direct access and indirect access via documentation. These controls assume importance in the case of valuable, portable, exchangeable or desirable assets. Supervision: Any system of internal control should include the supervision by responsible officials of day-to-day transactions and the recording thereof. The supervisory role undertaken by staff should be allocated to those with proper training and suitability to such a function.