Internal Check

Meaning Of Internal Check

Internal check system is a part of the internal control system of the business. This is also called Internal Block. Each trader wants that he should be able to control the internal activities of his business, in such a manner that he can get maximum profits and the. chances of mistakes, fraud, etc., are could be minimum. The system of internal check is one such arrangement, in which the activities of employees are divided in such a manner that the work of one employee is independently checked by the other employee. Unless all employees of the organisation are become united, the chances of fraud etc., is not there.

For example – Suppose a customer presents a cheque of ₹1000 to the bank for payment. If all the works of checking the cheque, its investigation, its entry in books of accounts and payment of that cheque are done by a single bank employee, then he can by increasing a zero in ₹1000, make it ₹10000 in the bank books, give payment of ₹1000 only to the customer and can keep himself inappropriately the balance of ₹9000.

If the work of encashment of cheques is divided among three employees, one shall investigate the cheque, and make entries in the books of accounts. Second employee shall check this entry and send it to the third employee making cheque payments. The third employee shall make payment to the customer. In this system a single work is divided among three persons, and the work of first employee is automatically (without any special efforts) checked by the second employee, and the third employee shall make the payment of ₹1000 written in the cheque. In such a case, misappropriation cannot happen, unless all three employees unite.

Definition

According to Spicer and Pegler

The internal check is such a system of management of a business, in which the work which is to be done by the employees is divided by the organisation in such a manner, that no employee can do the written accounting work of a transaction from the beginning to the end, and the work of each employee is also surely and independently checked by another employee, so that without any joint and pre-planned efforts of all employees, the happening of mistakes and frauds becomes impossible, and if any mistake occurs, it is immediately detected at the time of accounting, by another employee.