Advantages/Merits Of Internal Check System
Main advantages of internal check system can be studied as follows:
1. Division Of Work
Internal check ensures proper work distribution to the employees. Accounting and operational works are distributed according to the qualification, skills and experience of the employees.
2. Easy Location Of Errors
Internal check system helps to discover errors and frauds very quickly because errors of one staff is detected by another. So, errors and frauds can be prevented before the audit.
3. Greater Efficiency
Internal check helps to increase efficiency of the employees which leads to higher productivity.
4. Preparation Of Final Accounts
It makes possible to prepare final accounts of the company (trading account, profit and loss account and balance sheet) in short time which facilitates final audit.
5. Helpful For Auditor
Auditor can conduct final audit in short time with less effort because there is no need to examine all the accounting records in details.
6. Suitable For Large Business
It is very suitable for large business firms with many staffs, large financial transactions and large resources.
Disadvantages/Demerits Of Internal Check System
Some notable drawbacks or disadvantages of internal check system can be highlighted as follows:
1. Not Suitable For Small Firms
Internal check requires more effort, more time and more staffs. So, it is unsuitable for small business organizations having less transactions and resources.
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2. Creates Confusion
Internal check may create confusion among the staffs which may lead to conflict.
3. Decrease In Work Quality
Auditor completely depends on internal check while conducting final audit. It may decrease the quality of his work.
Pros And Cons Of Internal Check In Short
Pros:
- It promotes division of work
- It makes easy to locate errors, frauds and loopholes
- It boosts employee efficiency which helps to improve productivity
- It is helpful for final audit
Cons:
- It consumes extra time and cost
- It is not useful for small organizations
- It may create misunderstanding, confusion and conflict among the staffs in the firm
