Internal control procedures are used to prevent fraud, and are vital to every well-run organization. Such systems separate duties between employees within an organization. It is important to have internal control procedure manuals on hand. Employees use them as references when procedures or duties are in question. Information contained in internal control procedure manuals varies from company to company, but the procedure for writing one is the same.
Write an overview and table of contents. The overview briefly describes fiscal responsibility, which includes the concepts and components of internal control. The table of contents begins with Segregation of Duties. The contents that typically follow are: Reviews, Reconciliations, Approvals, Assets, Disbursements, Human Resources, Purchasing and Contacts.
Complete the Segregation of Duties section. Outline details regarding the separation of duties for things such as employees receiving and posting payments, as opposed to depositing payments. Another important separation is that if one employee is a payee, another employee makes the check out.
Determine procedures for the next two sections, Reviews and Reconciliations. Reviews are procedures set up to routinely perform budget investigations, spot-check transactions and investigate unusual activity. The Reconciliations section contains procedures such as comparing sets of data to ensure accuracy, looking into differences and taking action. This also includes specifically outlining that an employee entering transactions does not reconcile any of the bank accounts.
Complete the Approvals, Assets and Distributions sections. The Approvals part states which employees have authority for approving transactions. Authority is only given to responsible employees with detailed knowledge about the company. The Assets section lists all types of assets within the organization. Under each asset category, specific procedures are outlined detailing how assets are handled and monitored. The Distributions section details the company’s policies and procedures of distributing money, including payroll checks.
Complete the manual by finishing the last three sections: Human Resources, Purchasing and Contacts. The Human Resources (HR) section details instructions for HR employees as to how employee information is handled. The Purchasing section explains the company’s purchasing procedures. Finally, the Contacts section lists people in the company who employees can contact when questions or problems arise.