Disadvantages of Internal Check
Internal Check is an arrangement of staff duties of a business in such a way that work is automatically checked by the next staff while performing their duties. Depending on each other proves fatal in the quick disposal of the work. If one person is absent, the day-to-day work will be seriously disrupted. It is a system or method introduced with defined instructions given to staff as to their sphere of work with a view to controlling and verification of their work and also maintenance of accurate records as the ultimate aim.
System Internal check system is useful to every stakeholder of the business even though it has some disadvantages which are as follows:
- Quality is sacrificed for Promptness:
Under the internal check system, every staff wants to complete her/his work in time. In an internal check system quality of work declines because the clerks of the business attach greater importance to become quick and do not care if in the process their work gets sub standardized. So, s/he performs work in a hurry which leads to errors.
- Chances of Collusion:
Under the internal check system, once work is checked by another staff, the latter detects errors and frauds. So, there are chances of conflict between or among the staff. Though the internal check system protects errors and frauds in reality there may be chances of collusion between two or more employees to indulge in frauds or malpractices. Staff may form a group for personal benefits which leads to delay in work and increases errors and frauds.
- Disorder in Work:
In the absence of a properly organized system of the internal check, there will be chaos and disorder in the working of the business. If the system is not fully organized and if there is any failure in the system, it creates disorder and confusion hence, chances of errors and frauds increase.
- Creates Confusion
The internal check may create confusion among the staff which may lead to conflict. As the same work is done by the employee’s day-after-day the job becomes boring and the employees lose their creativity.
The system of internal check is more expensive and time-consuming. A system of Internal check systems quite expensive especially for small business houses.
- Risky for an auditor
If the auditor does not apply tests and procedure his own and if he relies on the output of the system his work cannot be free from irregularities if the system itself proves to be defective.
- Not Suitable For Small Firms
This system is not applicable to small organizations where there are only a few employees. Small organizations cannot use the internal check system because it needs more staff which increases the cost. The internal check requires more effort, more time, and more staff. Only large organizations having a number of departments and the complexity of jobs can get the benefit from this system. So, it is unsuitable for small business organizations having fewer transactions and resources.