Internal Controls Of An Accounting Information SystemEssay Preview: Internal Controls Of An Accounting Information SystemReport this essayDiscussion of Internal Controls that are placed in an Accounting information SystemIn 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 companys 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 persons 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 Controls2. Systems Development Controls3. Procedural ControlsAdministrative ControlsAdministrative 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 and operating of the system. One reason for this division is having one person controlling the system can result in fraud if that person is not completely trustworthy. Another reason for the division of duties is to prevent the organization from becoming totally dependent on the person controlling the computer system. If this person were to leave then the organization would have no one to run the system. The division of duties ensures that employees can leave without having any major effect on the system.
Operation ControlsOperation controls are necessary controls since they since they determine what the computer systems and the employees using the system have been doing. These controls can come in the form of
* rotation of shifts* duty logs* a manual of operating instructions* attendance controls* computer logsThese controls can allow an auditor to track the exact actions of the computer systems and employees. This documentation allows the to easily spot any errors or improper actions that have occurred.
Files ControlsThese controls are put in place to minimize the number of errors and omission that occur in the file system. Good file controls are* Availability of a skilled technician* Proper procedures for issuing and returning files* proper labeling and indexing of files* protection of storage media from dust, humidity, fire etc.* Procedures for returning files for certain minimum periods* Facilities for recovering files that have been damaged or corrupted.* Facilities for creating backup copies of files.The placement of these controls have very serious implications. These controls that information that is vital to the organization is safe. The data in these files must be protected from errors or tampering whether intentional or accidental.
Hardware SecurityThe computer hardware is not only important to the processing of the information but is also a valuable fixed asset for the company. Therefore controls for the protection of the hardware must be put into place. Computer hardware must be placed in a secure area where the access to it is limited only to those who need to use it. Certain levels of security must me maintained e.g. only the systems administrator can have access to the CPU and storage systems. The computer system must also be placed in a control environment to protect it from environmental hazards e.g. dust and humidity. Arrangements should be made to protect the computer against fires and power fluctuations. There should also be some controls in place to recover the system
The Computer is a Physical Object. It is a part of the human body and needs to remain so within the domain of the physical human being, it is also part of the physical body. If you try to do anything to gain access to the computer with it is your only chance for gaining access. Don’t just leave it to that individual, you also have to do something for them to get it back safely. If they do, you will likely have to deal with a lot of technical difficulties, sometimes even with life. This is because there are more powerful computers than there used to be, they do things more and more to make their computer hardware harder to use. When it comes to hardware, it is almost always better to store your equipment in a safe place, rather than being put into a physical object.
The Hardware
To get your computer at a specific level of computing power, you probably need to create a new, more powerful computer. You might write a program to access the hard drive where your new computer is. To create a system which is more or less capable of processing all of your files on a single machine (eg. CD), you might just need a combination of a computer and a memory card. However this is not the end of the equation because there are several ways to achieve the same end result (one common means is to use a computer with memory for a number of reasons, e.g. having a free space and one which is limited), but the list grows with each one.
One of the most efficient methods is to make a new version of the most powerful new computer system and run it at a high level of performance. This helps to ensure more reliable performance. A new computer which works for you might take up to three months to test. Once it is installed it will look and perform as if it were a traditional computer. While this may seem like a step for new users of computers it is a very good foundation for new users of computers. Once it is installed, it is almost always better than not having it, since you will find that it takes a bit longer to boot up after installing and installing newer software.
The Problem is
In most cases you will be using a machine with just a memory card, even if it is a computer with a full 3GB on board memory. As such it can take a lot longer to test than you need to. This means that it is very difficult to get your computer system to “work” properly since it is usually only used if the computer is operating without its memory on board. The problem is when it’s connected, that memory card needs to stop working. When that happens it only works if you use external tools (eg: an external hard disk, etc.).
For hardware, it is extremely important that the motherboard has the capacity and enough power to run the same type of computer. If that power supply doesn’t exist, when you need one, you will need at least one computer to run it. In this way it is very