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Accounting System

By:   •  Research Paper  •  2,055 Words  •  April 21, 2010  •  1,133 Views

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Accounting System

Accounting System Controls

Accounting System Controls

In accounting systems, certain controls are needed to ensure that employees are

doing their jobs properly and ensure that the system runs properly. These checks

are in the best interest of the organization. These controls come in the form of

internal and external controls for the system. The internal controls are the

checks that are placed in the system my the company's own management and

directors. Today more and more companies are moving from the manual accounting

systems to computerized accounting information systems. The advantages of a

computerized system are increases in the speed and accuracy of processing

accounting information. However, as systems become computerized, the internal

controls for that system has to be adapted accordingly. This is because

computerized systems bring with them certain unique problems that can only be

removed or minimized by adapting the present controls and adding new controls.

These problems are

· In a manual system there is a paper trail for the internal auditor to

follow. All records and transactions are kept on paper and so an auditor has

clear and documented proof of what has transpired. Computerized systems rarely

have a clear paper trail to follow. Since computers do all of the sorting of the

information the company rarely sorts the source documents. Also the computer

does most of the calculations and processing so there would not be the amount of

documentation that there would be in a manual system.

· Another problem of computer systems is the fact that there can be

difficulty in determining who entered the data. In a manual system the identity

of the person entering the data can be identified possibly by the person's

handwriting. This cannot be done in a computerized system. This makes it very

difficult to determine who is responsible for errors or fraud.

· Since the computers do all calculations and processing errors can

occur due to bad design of the program. This can be difficult to detect

especially if the error does not occur frequently and only does so under

particular conditions.

· Computer systems also offer new opportunities for fraud. If a

computerized system is not set up properly and certain checks not put in then

the computer system can be used to defraud the company. The fact that it is

difficult to trace who enters the data only adds to the magnitude of this.

In order to minimize the risks of errors or fraud occurring in the

computer system certain controls have to be put into place. These controls can

be broken up into three different categories. They are

1. Administrative Controls

2. Systems Development Controls

3. Procedural Controls

Administrative Controls

Administrative controls are those controls are those controls that are

placed on the system to ensure the proper organization and processing of data.

These administrative controls are

Division of duties.

Duties are assigned to different individuals in the organization. This

is done in such a way that no one person can have full control over a

transaction. This ensures that an individual cannot have full control over the

creation

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