Commercial Law and Preliminaries of Auditing · Ch 9 — Internal Control System
Distinctions: Control vs. Check, and Check vs. Audit
Distinctions: Control vs. Check, and Check vs. Audit
Internal Control System vs. Internal Check System, and Internal Check vs. Internal Audit
Internal Control System vs. Internal Check System
Note
Internal Control vs. Internal Check
| Basis | Internal Control System | Internal Check System |
|---|---|---|
| Scope | A broad umbrella — organisational, administrative, AND accounting safeguards together | A narrower, specific technique WITHIN internal control |
| What it covers | The entire plan of organisation and every procedure/policy management adopts | Specifically, how routine accounting/clerical work is divided so one employee's work checks another's |
| Nature | Includes controls beyond day-to-day transaction processing (e.g. staff training, organisation charts) | Confined to the arrangement of routine transaction-processing duties |
| Relationship | The whole | A part of the whole |
Internal Check vs. Internal Audit
This distinction is one of the most heavily tested in this chapter, because the two ideas sound
similar but differ in a fundamental way:
Note
Internal Check vs. Internal Audit
| Basis | Internal Check | Internal Audit |
|---|---|---|
| When it happens | CONTINUOUSLY, as part of the ordinary routine of doing the work itself | PERIODICALLY, as a separate review carried out AFTER the routine work is done |
| Who performs it | The same regular staff, as a built-in by-product of how duties are divided | A separate, dedicated internal audit staff/department, distinct from those who did the original work |
| Extra staff needed | No — no separate checking staff is employed | Yes — a distinct internal audit function/staff is required |
| Nature of the check | Automatic and continuous, arising from the DESIGN of the work itself | A deliberate, planned, separate review or investigation | …