Bank employees use a system known as the "maker-checker" system. An employee will record an entry in the appropriate journal, and then a supervisor will verify and approve the entry. These days, as all of a bank's accounts are computerized, the employee first enters a batch of entries into the computer, and then the entries are posted automatically to the general ledger account after the supervisor approves them on the system. Access to the computer system is password-protected and task-specific, which means that the computer system will not allow the employee to approve a transaction or the supervisor to record a transaction. Identify the principles of internal control, inherent in the maker-checker procedure, used by banks.

The principles of internal control that are inherent to the maker-checker procedure are as follows:

Clear definition of roles

The roles in the maker-checker procedure are clearly defined - Employees prepare the journal batches and supervisors approve them.

Appropriate Authorisation

Since the role of the supervisors is to review the journal batches, we can see that the principle of internal control of Appropriate Authorisation is inherent in the maker-checker procedure.

Separation of Duties

There is a clear separation of duties inherent in the procedure. Employees record the batch of entries, and then these are approved by a supervisor before being posted to the general ledger account.

Access Controls

The separation of duties inherent in the procedure is enforced by the computer system of the bank - Employees cannot approve a transaction and Supervisors cannot record transactions. Access to the computer system is also password-protected. These Access Controls are inherent to the maker-checker procedure.