What is an Internal Control Checklist?
An internal control checklist is intended to give an organization a tool for evaluating the state of its system of internal controls. By periodically comparing the checklist to actual systems, you can spot control breakdowns that should be remedied. When followed regularly, a checklist has the following benefits:
There are fewer audit comments about internal control weaknesses
Management can gain assurance that reported financial results are accurate
There is a reduced risk of asset losses due to fraud
There is less chance that the organization is not complying with any applicable regulatory requirements
Internal controls are a system of policies, procedures, reviews, segregation of duties, and other activities that are used to minimize the risk of asset loss, produce accurate financial statements, and conduct operations in an efficient and orderly manner.
When going through an internal control checklist, the intent is to spot any controls that are missing or weak. Such a finding does not automatically indicate the presence of a control problem that requires remediation. If there are offsetting controls elsewhere in the system, a weak control could be considered acceptable. For example, if a signature plate is used to sign checks, this could be considered a control weakness, except that a formal approval is required upstream for every purchase order issued. This offsetting control ensures that purchases are still approved somewhere in the purchasing system.
