Internal controls over non-current assets are designed to ensure the orderly and efficient running of the business, adherence to management policies, safeguarding of assets, the prevention of fraud and error and the completeness and accuracy of the accounting records. Required: List the internal controls that a small printing company with office equipment, motor vehicles and plant and machinery should have in place to achieve the objectives described above

Internal controls

(ii) Controls contributing to the orderly and efficient running of the business, safeguarding the assets and adherence to management policies would include the following:

  • Physical controls over access to the assets such as the locking of doors and the maintenance of an appropriate fire and flood resistant environment;
  • Insurance against disaster and contingency plans;
  •  The use of passwords for access to computers and plant and equipment;
  •  The numerical or other tagging of all equipment, referenced to an asset register;
  •  Performing periodic asset audits;
  •  Internal regulations requiring staff who take equipment such as laptops and motor vehicles home to ensure that they are secure, and prohibiting staff from using their own software on company equipment;
  •  The maintenance of firewalls and virus checking software.

(iii) Controls contributing to the prevention of fraud and error, and the completeness and accuracy of the accounting records would include the following;

  • The preparation and monitoring of capital expenditure budgets together with authorisation of capital expenditure,
  •  Disposals and depreciation rates by independent persons at an appropriate level within the organisation who do not have day-to-day responsibility for the related records or assets;
  •  The maintenance of an asset register that is reconciled to the general ledger and the assets themselves;
  •  The periodic checking and review of asset lives, and fully depreciated assets, to ensure that assets are being depreciated correctly, over an appropriate period of time.
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