Para 3.20.9 — MSO (Audit)
Original Rule Text
3.20.9 It should be examined whether each organisational unit in the entity is adopting sound practices so as to ensure proper internal control. These include the provision of locked store rooms with access restricted only to authorised persons, arrangements for surprise physical verification of cash, bank reconciliation by independent personnel, precheck of payments, institution of checks to see that transactions are properly authorised, dual custody of valuable negotiable assets, independent periodical verification of the existence of recorded material resources, etc. It should also be seen whether the system provides for departmental enquiry into all cases of shortage, loss, theft and embezzlement.
- Evaluation of standards of quality and performance
What This Means
The auditor must examine whether each unit in the organization follows sound internal control practices. This includes physical safeguards like locked storerooms with restricted access, surprise cash verification, independent bank reconciliation, pre-checking of payments, dual custody of valuable assets, and periodic physical verification of materials. The auditor should also check whether there is a system for conducting departmental enquiries into all cases of shortages, losses, theft, and embezzlement.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Storerooms must be locked with access restricted to authorized persons only
- 2Surprise physical verification of cash must be conducted
- 3Bank reconciliation should be done by independent personnel (not the cashier)
- 4Payments must be pre-checked before release
- 5Valuable negotiable assets require dual custody
- 6A system for departmental enquiry into shortages, losses, theft, and embezzlement must exist
Practical Example
During audit of a government treasury, the auditor finds that bank reconciliation is being done by the same cashier who handles daily transactions, and the last surprise cash verification was done over a year ago. The auditor also discovers two cases of cash shortage totaling Rs. 50,000 that were noted but no departmental enquiry was initiated. These are flagged as serious internal control weaknesses.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
Why must bank reconciliation be done by someone other than the cashier?▼
What is dual custody of valuable negotiable assets?▼
When should a departmental enquiry be initiated for shortages?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.