Evolution of Western Internal Control Theory

Abstract

Internal control developed from internal check, which was born in ancient Egyptian national treasury management. Before the 1940s, scholars were familiar with internal check though internal control had already been mentioned or defined. According to the Kohler’s Dictionary for Accountant, Internal check system refers to a business process designation which is to provide effective organization and operation and to prevent errors and illegal transactions from occurring. Its main characteristic is duties separation, which requires that any personnel or department should not have full authority to get access to any certain part of business processes. People or departments need cross-checking or cross-controlling. Designing the effective internal check system is to make sure that each individual business process passes through the necessary procedures, and among these procedures, internal check system is always an indispensable part.