An employee given responsibility or custodianship of an asset should not be employee charged with maintenance of records for that asset. As an example, it is a good practice to avoid a situation where an employee responsible for maintaining payroll records can also sign payroll checks.
Proper control of an organization’s assets cannot be maintained without adequate records. This requires careful design of an accounting information system to ensure that such information is available for management on a timely basis and that the information provided is accurate.
All general ledger accounts must be reconciled or compared with subsidiary ledgers at the end of each accounting period. Any differences between the two balances must be investigated and explained so that errors or irregularities can be identified and corrected. In addition, account records which involve physical assets such as inventory, equipment or supplies should also be periodically reconciled with a physical count of those assets.
Periodic internal audits by organization employees may be used to discover errors or irregularities, to determine if policies and procedures are being followed, and to uncover inefficiency. As a final check and balance, an organization may use external auditors to review the existing system of internal control and make suggestions for improvement.