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Tuesday, May 19, 2015

Prenumbered accountable forms as a basic internal control procedure

Monitoring of accountable forms is an important function of internal control in all organizations; be it business or governmental agency. Accountable forms may range from official receipts issued for a cash sale to stock transfer order issued to evidence interplant transfer of goods. An important aspect of this control is the sequential numbering of accountable forms. These numbers are printed in any conspicuous part of the form for easy retrieval and reference.

A sample official receipt shows an OR No. at the document's
upper right side. Pre-numbering enhances the transactions
verifiability by referencing them to a pre-numbered source
document. (Photo owned by
Pre-numbering of forms does not only apply to manually-prepared forms but also to electronically-generated forms. This is because sequential numbering of accountable forms is a critical internal control process in all types of organizations. Sequential numbering helps company personnel review and monitor the flow of transactions. It also allows easy retrieval of the source documents and transaction details in case needed.

For an audit professional, sequential numbering is very essential. It will be difficult, if not impossible to audit an organization with its forms not sequentially pre-numbered. Pre-numbering provides audit trail that allows the auditor to process, analyze and comment on those transactions.

Let us take for example an experience I had with one client whose transfer of stocks is monitored by a stock transfer form. They issue these forms once they transfer goods from one department to another department (e.g., from the operations department to the logistics department). Missing forms that might indicate unauthorized transfer of goods will be easily detected by the auditor by just looking at the number sequence of compiled transfer forms.

Establishing strong internal control procedures and strict observance of those procedures are important for an organization to achieve its objectives. Sequential numbering of forms is a basic internal control process and its observance will help other internal control procedures to work as intended.

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