Most internal control systems provide for independent internal verification. This principle involves the review of data prepared by employees. To obtain maximum benefit from this verification:
- Companies should verify records periodically or on a surprise basis.
- An employee who is independent of the personnel responsible for the information should make the verification.
- Discrepancies and exceptions should be reported to a management level that can take appropriate corrective action.
This internal verification is especially useful in comparing recorded accountability with existing assets.
“Independent internal verification works to make sure your employees are following the rules and not shortcutting internal controls.” An internal verification examines and analyzes internal accounting systems and controls whereas an external audit concentrates on financial statement analysis.
Independent internal verification refers to periodically sending an expert team for reviewing the practices of record-keeping of a department, segment, or foreign subsidiary. The team can come from an internal audit department, but some organizations adopt distinct operating configurations or hierarchical structures for monitoring accounting work. For instance, an organization can establish a consultancy operation or internal advisory department for finding the cause of lingering inefficiencies out of certain processes, checking cost accounting methods, or helping department heads in quality assurance functions.