separation of responsibilities;
One of the most important principles of internal control is that no person or circle should be solely responsible for all steps of a transaction. If the management of the business unit is to direct its activities according to the regulatory plan, each transaction requires five steps: (1) licensing, (2) review, (3) approval, (4) execution, and (5) registration. be If any of the aforementioned steps are carried out by an independent person or circle, the internal control system is strengthened and no person or circle can commit mistakes and violations and keep it hidden. Also, the separation of responsibilities leads to the specialization of employees, which is a factor in increasing the overall efficiency of operations.
In order to properly separate the responsibilities in a business unit, the stages of a credit sale transaction are shown below:
1- The management of the business unit issues a credit sale license for certain customers in a certain amount.
2- The customer’s purchase order is reviewed in the sales department and then sent to the credit department for approval.
3- The credit department examines and approves the customer’s credit status to determine the amount of credit and sales conditions based on the procedures of the business unit.
4- The sending circle performs the transaction by receiving the goods from the warehouse and sending them to the customer.
5- The accounting department adjusts the transaction in the registers and customer invoices using the documents prepared in the sales, credits and shipping departments.
When the responsibilities of licensing, checking, approving, carrying out and registering transactions are separated in this way, none of the departments can carry out transactions without permission and unverified, and the possibility of unregistered transactions is significantly reduced. because to transfer information related to the transaction from one circle to another, documentation must be prepared.
Mehdi Koh Soltani (financial services, accounting, financial and tax consultant):
Group of accountants, auditors, Tabriz
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