TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area General Controls 1. Chart of accounts 2. Accounting procedures manual 3.

. Organizational chart to define responsibilities 4. Absence of entries direct to ledgers 5. Posting references in ledgers 6. Review of journal entries 7. Use of standard journal entries 8. Use of prenumbered forms 9. Support for all journal entries 10.Access to records limited to authorized persons 11.Rotation of accounting personnel 12.Required vacations 13.Review of system at every level 14.Appropriate revision of chart of accounts 15.Appropriate revision of procedures 16.Separation of recordkeeping from operations 17.Separation of recordkeeping from custodianship 18.Record retention policy 19.Bonding of employees 20.A conflict of interest policy Cash Funds Controls 1. Imprest system 2. Reasonable amount 3. Completeness of vouchers 4. Custodian responsible for fund 5. Reimbursement checks to order of custodian 6. Surprise audits 7. No employee check cashing 8. Physically secure 9. Custodian has no access to cash receipts 10.Custodian has no access to accounting records Yes No N/A Comments

Yes

No

N/A

Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Cash Receipts Controls Detail listing of mail receipts Restrictive endorsement of checks Special handling of postdated checks Daily deposit Cash custodians bonded Cash custodians apart from negotiable instruments 7. Bank accounts properly authorized 8. Handling of returned NSF items 9. Comparison of duplicate deposit slips with cash book 10.Comparison of duplicate deposit slips with detail A/R 11.Banks instructed not to cash checks to company 12.Control over cash from other sources 13.Separation of cashier personnel from accounting duties 14.Separation of cashier personnel from credit duties 15.Use of cash registers 16.Cash register tapes 17.Numbered cash receipt tickets 18.Outside salesmen cash control 19.Daily reconciliation of cash collections 1. 2. 3. 4. 5. 6. Yes No N/A Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Cash Disbursements Controls 1. Numbered checks 2. Sufficient support for checks 3. Limited authorization to sign checks 4. No signing of blank checks 5. All checks accounted for 6. Detail listing of checks 7. Mutilation of voided checks 8. Specific approval of unusually large checks 9. Proper authorization of persons signing checks 10.Control over signature machines 11.Check listing compared to cash book 12.Control over interbank transfers 13.Prompt accounting for interbank transfers 14.Checks not payable to cash 15.Physical control of unused checks 16.Cancellation of supporting documents 17.Control over long outstanding checks 18.Reconciliation of bank account 19.Independence of person reconciling bank statement 20.Bank statement direct to person reconciling 21.No access to cash records or receipts by check signers Yes No N/A Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Investments Controls 1. Proper authorization of transactions 2. Under control of a custodian 3. Custodian bonded 4. Custodian separate from cash receipts 5. Custodian separate from investment records 6. Safety deposit box 7. Record of all safety deposit visits 8. Access limited 9. Presence of two required for access 10.Periodic reconciliation of detail with control 11.Record of all aspects of all securities 12.Availability of brokerage advices, etc. 13.Periodic internal audit 14.Securities in name of company 15.Proper segregation of collateral 16.Physical control of collateral 17.Periodic appraisal of collateral 18.Periodic appraisal of investments 19.Adequate records of investments for application of equity method Yes No N/A Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Accounts Receivable and Sales Controls 1. Sales orders prenumbered 2. Credit approval 3. Credit and sales departments independent 4. Control of back orders 5. Sales order and sales invoice comparison 6. Shipping invoices prenumbered 7. Names and addresses on shipping invoice 8. Review of sales invoices 9. Control over returned merchandise 10.Credit memoranda prenumbered 11.Matching of credit memoranda and receiving reports 12.Control over credit memoranda 13.Control over scrap sales 14.Control over sales to employees 15.Control over C.O.D. sales 16.Sales reconciled with cash receipts and A/R 17.Sales reconciled with inventory change 18.A/R statement to all customers 19.Periodic preparation of aging schedule 20.Control over collections of written-off receivables 21.Control over A/R write off, e.g., proper authorization 22.Control over A/R written off, i.e., review for possible collection 23.Independence of sales, A/R, receipts, billing, and shipping personnel Yes No N/A Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Notes Receivable Controls 1. Proper authorization of notes 2. Detailed records of notes 3. Periodic detail to control comparison 4. Periodic confirmation with makers 5. Control over notes discounted 6. Control over delinquent notes 7. Physical safety of notes 8. Periodic count of notes 9. Control over collateral 10.Control over revenue from notes 11.Custodian of notes independent from cash and recordkeeping Yes No N/A Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Inventory and Cost of Sales Controls 1. Periodic inventory counts 2. Written inventory instructions 3. Counts by noncustodians 4. Control over count tags 5. Control over inventory adjustments 6. Use of perpetual records 7. Periodic comparison of G/L and perpetual records 8. Investigation of discrepancies 9. Control over consignment inventory 10.Control over inventory stored at warehouses 11.Control over returnable containers left with customers 12.Preparation of receiving reports 13.Prenumbered receiving reports 14.Receiving reports in numerical order 15.Independence of custodian from recordkeeping 16.Adequacy of insurance 17.Physical safeguards against theft 18.Physical safeguards against fire 19.Adequacy of cost system 20.Cost system tied into general ledger 21.Periodic review of overhead rates 22.Use of standard costs 23.Use of inventory requisitions 24.Periodic summaries of inventory usage 25.Control over intracompany inventory transfers 26.Purchase orders prenumbered 27.Proper authorization for purchases 28.Review of open purchase orders Yes No N/A Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Prepaid Expenses and Deferred Charges Proper authorization to incur Authorization and support of amortization Detailed records Periodic review of amortization policy Control over insurance policies Periodic review of insurance needs Control over premium refunds Beneficiaries of company policies Physical control of policies Intangibles Controls Authorization to incur Detailed records Authorization to amortize Periodic review of amortization Yes No N/A Comments

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

Yes

No

N/A

Comments

1. 2. 3. 4.

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Fixed Assets Controls 1. Detailed property records 2. Periodic comparison with control accounts 3. Proper authorization for acquisitions 4. Written policies for acquisition 5. Control over expenditures for self-construction 6. Use of work orders 7. Individual asset identification plates 8. Written authorization for sale 9. Written authorization for retirement 10.Physical safeguard from theft 11.Control over fully depreciated assets 12.Written capitalization--expense policies 13.Responsibilities charged for asset and depreciation records 14.Written, detailed depreciation records 15.Depreciation adjustments for sales and retirements 16.Control over intracompany transfers 17.Adequacy of insurance 18.Control over returnable containers Yes No N/A Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Accounts Payable Controls 1. Designation of responsibility 2. Independence of A/P personnel from purchasing, cashier, receiving functions 3. Periodic comparison of detail and control 4. Control over purchase returns 5. Clerical accuracy of vendors invoices 6. Matching of purchase order, receiving report, and vendor invoice 7. Reconciliation of vendor statements with A/P detail 8. Control over debit memos 9. Control over advance payments 10.Review of unmatched receiving reports 11.Mutilation of supporting documents at payment 12.Review of debit balances 13.Investigation of discounts not taken Accrued Liabilities and Other Expenses Controls 1. Proper authorization for expenditure and incurrence 2. Control over partial deliveries 3. Postage meter 4. Purchasing department 5. Bids from vendors 6. Verification of invoices 7. Imprest cash account 8. Detailed records 9. Responsibility charged 10.Independence from G/L and cashier functions 11.Periodic comparison with budget Yes No N/A Comments

Yes

No

N/A

Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Payroll Controls 1. Authorization to employ 2. Personnel data records 3. Tax records 4. Time clock 5. Supervisor review of time cards 6. Review of payroll calculations 7. Comparison of time cards to job sheets 8. Imprest payroll account 9. Responsibility for payroll records 10.Compliance with labor statutes 11.Distribution of payroll checks 12.Control over unclaimed wages 13.Profit sharing authorization 14.Responsibility for profit sharing computations Long-Term Liabilities Controls 1. Authorization to incur 2. Executed in company name 3. Detailed records of long-term debt 4. Reports of independent transfer agent 5. Reports of independent registrar 6. Otherwise adequate records of creditors 7. Control over unissued instruments 8. Signers independent of each other 9. Adequacy of records of collateral 10.Periodic review of debt agreement compliance 11.Recordkeeping of detachable warrants 12.Recordkeeping of conversion features Yes No N/A Comments

Yes

No

N/A

Comments

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TYPES OF INTERNAL CONTROLS Checklist Sorted by Functional Area Shareholders Equity Controls Use of registrar Use of transfer agent Adequacy of detailed records Comparison of transfer agents report with records 5. Physical control over blank certificates 6. Physical control over treasury certificates 7. Authorization for transactions 8. Tax stamp compliance for canceled certificates 9. Independent dividend agent 10.Imprest dividend account 11.Periodic reconciliation of dividend account 12.Adequacy of stockholders ledger 13.Review of stock restrictions and provisions 14.Valuation procedures for stock issuances 15.Other paid-in capital entries 16.Other retained earnings entries 1. 2. 3. 4. Yes No N/A Comments

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