What is an Internal Check?

An internal check is the splitting of work tasks so that one person is not responsible for every step in a transaction. It is an essential part of an organization’s system of internal control, since it can be quite effective in reducing transactional errors, and may spot instances of fraud.

Advantages of an Internal Check

There are several advantages to using an internal check. First, the splitting of tasks allows for the verification of work by a second person, thereby reducing the risk of fraud. Second, an internal check also reduces the number of transactional errors, since the second person can spot and correct them as part of her ongoing work.

Disadvantages of an Internal Check

A problem with internal checks is that splitting tasks is less efficient. This is because there is a queue time involved whenever the transaction workflow shifts to a different person. Consequently, its use may be limited to high-value transactions where there is a greater risk of loss. If used on low-value transactions, it may significantly increase their cost.