Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Business Accounting Systems Accounting Systems 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 by 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. 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. Some of these controls include the following: Administrative controls are those controls are those controls that are placed on the system to ensure the proper organization and processing of data. 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 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 a manual of operating instructions These 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. The 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 in case the hardware fails. These controls would ensure that the breakdown of the hardware would not have a serious effect on the company. One important control is standardization. These consist of various standards that are laid down by management for the design and development of the system. These standards include the complete documentation of the development of the system. These standards would not only benefit in the correcting of problems and updating of the system, the documentation would allow the auditor to get a better idea of how the system works. This would help the auditor in spotting possible problems in the system. The involvement of the organizations management in the development of the system is an important control. With these controls, management must have documentation such as feasibility studies, budgets and performance evaluations. These documents would allow management to decide if the system being developed would be viable and cost effective. Without such controls, expensive projects can be started and never finished, costing the organization a great deal in time and money. These managerial controls force the development team to do a thorough job since they are accountable to management.. The training of the data processing staff is a very important control. Proper training of staff would reduce the number of errors that would occur in the system due to inadequate knowledge of the system. The trained staff would be less likely to make mistakes. Once that data has been entered into the system and is being processed, the processing controls are used to ensure that the data is processed properly. Processing controls are divided into two categories. These are The validation checks are made on the data when it is being processed. These checks ensure that the data is processed correctly. Validation checks include Checks in the size of file and records Check on consistency of fields in files Range tests on numbers and values Sequence checks to ensure that records are entered in the right order Error logs which contain a record of all errors that have occurred during the processing of the data. File checks are the controls to ensure that the integrity of the files that hold the data for the organization remain intact during processing. Some file checks are Use of header tables to identify files Use of trailer labels to ensure that the record is completely read. Arithmetic proof of the validation of certain fields by checking them with other fields in the record The outputting of processed data also has certain controls. These output controls are used to ensure the completeness, accuracy and timeliness of the output on screen, printed form as well as on storage media. Some output control procedures are Initial screening of the output to detect obvious errors Output should only be distributed by authorized persons to authorized Controls totals on the output should be checked against the control totals of the input to ensure the consistency of data. All the documents produced should be numbered and accounted for Highly sensitive materials should not be seen by the general data processing staff but should be outputted to a secure location. A feedback system must be developed between the users and the data processing department so that any errors that occur would be reported and When data is stored additional controls must be put into place to ensure that the data is stored properly and that the data is to tampered with in any way. These controls ensure that no unauthorized persons would be able to tamper with or destroy the data whether it be intentionally or deliberately. Some of these controls are Authorization controls to ensure that only authorized personnel is allowed to make amendments and deletions to the files. Controls to ensure that amendments and deletions are to be thoroughly documented so that the person who made the amendments can be made accountable for the changes they made. Controls to ensure that there are proper facilities for the backup of files. These include ensuring that files are backed up regularly, multiple backup files are kept and that these files are kept at a secure location and are easily retrievable in case of an emergency. Controls that would ensure that the data can be recovered in case of disaster. This includes transaction logs of complete system dumps which will make periodic backups of all the transactions that occur within the system. Computerized accounting systems bring with then a set of new and unique problems. The internal controls that have been put into place for a manual system to help the internal auditor cannot fully prevent or minimize the possibility of errors or fraud that come with the computerized systems. Therefore the old controls must be modified for the new system and new controls must be put in. Only then can the internal auditor ensure that the number of errors that occur within the system be minimized or even eliminated. Bibliography: Bibliography Basset P.H. (1993) Computerized accounts, NCC Blackwell. Grudinsku G., Burch J., (1998), Information Systems Theory and Practice, John Wiley and Sons, Inc. Word Count: 1995
Copyright © 2005 College Term Papers, INC All Rights Reserved.