A standard internal audit system is necessity for ensure and establish internal control system within the organization; and the basic requirement for standardizing the system is a well-defined set of guidelines. Such is the purpose of this guideline. These guidelines can be referenced as a tool to measure the financial- management performance and the level of internal control exist within the organization.
A standing or need based audit plan is to be formulated considering the nature of program activities. The plan may be on monthly/quarterly/periodic basis that must be approved by the competent authority of the organization.
An Internal Audit Cell will work independently and will report to the Director directly. They will constantly review all the activities of all projects and funds. This process is necessary to safeguard the accounting system against mistakes, fraud, and misappropriations. The internal auditing process will be:
The Organization shall follow the following steps in verifying and checking the validity of all the assets at its disposal:
The internal control system is most important for an organization to control its expenditure as well as maintain account accuracy. Such a system allows accounts to be internally checked and minimizes the possibility of fraud, irregularities, or misappropriation of funds. The individual conducting the internal audit will be an individual who is not involved with handling cash, transaction recording, voucher preparation, fund allocation, or disbursement.
All bills received shall be duly checked by the Accounts Department and compared with the relevant documents (such as cash memos, challans, purchase orders, materials receiving reports, indents, etc). No payment shall be made without the prior approval of the Director or the authorized person. The bills and the invoices for payment shall be canceled by affixing the stamp “PAID” and shall be dated. All payments must have the original supporting documents as its attachments, photocopies are not acceptable. All payments shall be record in the Cash Book and other relevant documents. Payments should be made within the budgeted amount. Payment vouchers should be prepared correctly and must be signed by the person who prepares checks, receives and approves them.
Before making payment by either cash or check, the person responsible for making the payment is to ensure that payment vouchers have been prepared, checked, and approved. Adjustments against advances for TA/DA shall be made within the stipulated time. Expenses incurred against the advance taken shall be adjusted subsequently and approved as per accounting procedures. No further advance will be made unless the previous advance has been adjusted.
The Accounts Department shall keep all payment vouchers in chronological order. Each financial year shall maintain a serial number beginning from 01. The Accounting Department shall file the vouchers along with all necessary supporting documentation. All vouchers and supporting documents shall be preserved for a minimum period of six years.
Salary payment for each employee shall be made via bank transfer advice. Each employee shall open a bank account in his/her own name, preferably with the same bank where project maintains its accounts.
The Accounting Department shall issue a cheque for the total amount of monthly salary payable to the employees and advise the bank a with salary payment sheet to credit the individual account of each employee with the correct amount. Prior approval of the Director shall be required in cases where salaries are paid in cash to any individual. The Accounting Department shall also maintain a salary register, which shall be updated every month.
The salary register will contain the following information:
All staff of the project will be paid their salaries in the last week of the month. Bank advice for salaries will be prepared by the Accounts Department before these days and there will be an instruction to the bank that the payment will not be allowed before the above-mentioned timeframe.
If any check is issued but not presented for collection by the payee within six months from the date of issue, the bank shall initiate the cancellation of that specific cheque in writing. Accordingly, the Accounts Department shall record a reversal entry in the cash book and keep a note in the bank reconciliation statement.
Any loss or theft of any project cheque or cheque book must be brought to the attention of the concerned bank management representative as early as possible.
The word “CANCELED” shall be written in the counterfoil as well as on the face of the cheque when a cheque is required to be cancelled. This information should be recorded in the cheque issue register, as well.
A cheque issue register shall be maintained for each issued cheque in a book in the prescribed manner.
Any payment exceeding cash limit must be made through an account payee cheque and payment up to cash limit..
For the withdrawal of any necessary money in liquid cash from any of project’s bank accounts (for working cash or for any operational expenses), a money requisition must approved by the Director or the authorized
Collection of monthly bank statements along with bank certificates confirming bank balances on monthly basis and relevant advice from each bank shall be the responsibility of Accounts Department.
After receiving the monthly bank statement, the bank balance shown in that statement as of last day of the month must be reconciled with the balance shown in the cash book on the same day via the preparation of a bank reconciliation statement. The accountant will prepare the bank reconciliation statement and it must be approved by the Director. The bank charges or interest payments must not be incorporated earlier in the cash book and should be entered in the cash book by preparing a voucher, as described. Any deposit/interest, payment or cheque not recorded in the bank accounts or bank statement shall be reconciled by adding or deducting from the closing balance as shown by the bank statement.
A reversal entry should be processed for canceling the cheque issue entry if a cheque is found not presented within its validity period. Any other differences should be thoroughly checked and investigated with the bank.
The Head of the Accounts Department shall initiate the ordering of new cheque books when the check leaf reaches the order form contained in the checkbook. When receiving the new cheque book, the respective person/representative shall count the check leaves and satisfy himself that the numbers of the check leaves are inorder.
The Accounts Department shall be the custodian of all organizational cheque books and shall ensure that the cheque books are preserved safety.
All vouchers (debit and credit) must be supported by the necessary documents (e.g. indent, memo, requisition etc.)
18.1 Fixed-Assets Register:
All fixed-assets acquired shall be recorded in the Fixed-Assets Register. The fixed-assets shall be physically verified at the end of each half year and results should be reconciled with the Fixed-Assets Register and shorts or excesses, if any, shall be adjusted in the books of accounts. Any assets that are damaged, sold, or otherwise disposed of must be recorded in the appropriate column of the register. Depreciation on fixed-assets will be recorded in the Fixed-Assets Register in appropriate column.
18.2 Movement Register:
Movements of project staff shall be recorded in this register. The information about date of departure, arrival, destination, staying time, mode of transport, purpose, remarks, etc. will be recorded in this register.
18.3 Salary Register / Salary Sheet:
Project shall maintain a Salary Sheet/Register for recording staff salary payments. It will contain the salary recipient’s name, designation, date of joining, number of working days, basic salary, house rent, medical allowance, transport allowance, income tax, salary deductions, etc.
18.4 Attendance Register:
Project shall maintain an Attendance Register for each staff member which will contain information on all office staff attendance. Salary payment calculation will be done on the basis attendance.
18.5 Store Register:
All stores shall be recorded in the Store Ledger or Stock Register which will contain information about quantity, price, date of receipt, date and quantity of issue, name of recipient, and source of materials along with a separate column for total received, total issued, and total balances of materials and signature of recipient.
18.6 Loan & Advance Register:
A Loan & Advance Register shall be maintained to record inter-project loans and advances purposes. It will contain information about the nature of advances, installments, and mode of adjustments, date of granting loans and advances, and probable date of complete adjustments. A note for record should be used for inter-project loan and advances matters.
18.7 Check-Issuing Register:
The Check-Issuing Register will be maintained for recording issued check information; it will contain the date of issue, check number, amount, project name and organization.
18.8 Log Book:
Project will maintain a Log Book for recording information including the driven hours, departure, and arrival of project staff in transit. It will be prepared for the purpose of checking the mileage and fuel consumption of project vehicles and is needed for controlling fuel expenditures.
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