Definition

Internal check

 Internal check is a method of organizing the accounts system of a business concern or factory where the duties of different clerks are arranged in such a way that the work of one person is automatically checked by another and thus the possibility of fraud or error or irregularity is minimized unless there is a collusion between the clerks, e.g., the receipt of cash is entered by the cashier on the debit side of the cash book; this is carried to the ledger by another clerk; the statement of account relating to this transaction is sent to the customer by a third clerk and so on. Thus, we see that the same transaction has passed through three different hands and the work of one is checked automatically by the other.

This minimizes the possibilities of fraud and errors unless all the three clerks join hands in defrauding their employer. Again if an error or fraud has been committed, it will be detected very soon by another clerk while the transaction is being automatically checked.

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