Internal Check
Que 1: Narrate Internal Check as Regards Purchase Returns.
Ans: Purchases returns acknowledged by suppliers may be
suppressed and cash payable may be misappropriated. Hence, an effective
internal check may prevent the possibility of frauds. The internal check on the
following lines may prevent the possibility of frauds in misappropriation of
good or cash as regards purchase returns.
- Procedure: The purchase return should adhere with predetermined procedure under the supervision of responsible officer.
- Statement of Goods Returned: the stores department must prepare a statement of goods to be returned to supplier with due permission of stores manager.
- Purchase Department: The statement prepared by stores department must be sent to purchase department, which approves the goods to be returned. Alter verification, the purchase department prepares an advice note and sent to ac- counts department.
- Credit Note: Credit note should be obtained from suppliers and serially numbered. The credit note is base for entries in purchase return book.
- Return Outward Book: All the goods returned should be entered in return outward book on the basis of debit note sent or credit note received from suppliers. Debit note sent should be approved by responsible officer. The accounts department examines the advice notes with original invoices and only after confirmation enters in the return outward book.
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| INTERNAL CHECK |
Que 2: Describe the Internal Check as Regard Credit
Purchases.
Ans: As stated earlier there is every possibility of
misappropriation of cash or goods or manipulation of accounts. Credit purchases
are one of the areas, which may be used by all those involved credit purchasing
of goods. The possible errors, which may be found this connection, may be as
follows.
a. Recording purchases without making any actual purchases
called fictitious purchases. The amount there on is misappropriated.
b. Reproduction of same invoice repeatedly and
misappropriation of cash thereon.
c. Manipulation of accounts with an intention to show either
more profit or less profit by means of showing dummy purchase at the end of the
year or omitting purchases at the end of the year.
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