1. The internal control violated is "Physical control". As per this internal control, Cash, checks, assets, documents etc should be properly secured. 2. It is violation of internal control system - Segregation of duties. 3. This is a violation of internal control system - Documentation control. 4. This is a violation of internal control system - Documentation control. 5. This is a violation of internal control system – independent internal verification.
Work Step by Step
1. These checks must be kept in a safe and then properly locked / sealed, so that no one can misuse them. 2. The company should assign two different executives to do this work, so that the work of one individual is cross checked by the other. 3. The company is using checks which are unnumbered. Any check issued and not recorded will get unnoticed, which may result into a fraud. Therefore it is required to have all the checks pre-numbered and a serial control is maintained, while issue of checks. 4. The bills filed in folder, can be again submitted for payment and can go undetected. It is therefore necessary that the paid invoiced are de-faced with a stamp PAID, with the details of check number etc. It will restrict its resubmission. 5. For proper internal control, instead of accountant doing the reconciliation, this work should be done by the internal auditor or some other executive.