Establish & Maintain Accounting Systems Essay Example

Controls in Accounting Information System

In the current economy, most of the business organizations rely on information system to enhance their control systems and overall managerial process. Competitiveness has characterized the business economy and for an entity to be able to compete effectively in the sector its accounting information system should have adequate and up-to-date control system. Accordingly, Peter’s strategy to deploy control system in the firm’s accounting system is of imminent importance and it will enable the firm to realize its strategic goals with ease.

Control systems enhance administrative control for the well being of the organization. The effectiveness of the administrative control that Peter will undertake will be felt when it will ensure that:

    • Plan for the organization is effective and up-to-date

    • Record procedures and system authorization is flexible

    • Sound practices is followed in the function performance and undertaking the duties effectively

    • Clerical controls are achieved

    • Competent staff is available

    • Personnel controls are effective and versatile

Consequently control system that Peter will incorporate in its operations will ensure that there is effective financial and accounting control procedure. The completeness of the accounting information and the overall reliability will be achieved by imposing these financial controls. It will ensure;

  • He receives the relevant revenues that he is entitled to and includes the amount in the books of account

  • Incur expenditure, only if, it is authorized properly

  • Account for the assets of the organization with accuracy

  • Record the organization’s liabilities and the provisions made on it

  • The available accounting records ensure reliability in accounts preparation.

As such the organization will effectively monitor its financial obligation and how the various departments use finances. This will minimize chances of funds misuse by the employees and fraud. In addition the accuracy of the financial information provided will not be compromised. Accounting control ensures that proper accounting principles and rules are followed to the later. In most cases the accountants usually face the problem of being bias when deciding on which strategy to use when accounting for various transactions. For instance in the case of method of depreciation and treatment of revenues and expenses will be based on the generally accepted accounting principles (GAAPs) and the International Financial Reporting Standards (IFRS) criterion.

Generally, the control system articulate to internal control of entity’s operations and when effectively monitored the control system will ensure that personnel in the organization are reliable. The reliability of the employees in the organization is achieved when each individual is given a clear responsibility to undertake. Surveillance is done by the operating management to ascertain the competency and honesty of the employees. In addition, the assets available in the organization will be safeguarded and relevant data and financial records that the organization may find it useful will be accurate and complete which will show the fair view of the organizations position in the economy.

In the organization, the range of controls that will be imminent in the accounting information system that Peter aims to incorporate in his business operation will encompass;

  • Accounting control

  • Comparison control

  • Documents control

In the case of accounting control, Peter will be able to employ this control in order to effectively achieve accuracy of the available accounting information. They incorporate;

    • Trial balance and double entry recording in an attempt to achieve accuracy in the postings revealed in the ledger accounts

    • Subsidiary ledgers balancing and maintenance of control accounts creditors, debtors, non-current assets which enhances accurate ledger accounts

    • Prepares effectively the bank reconciliations per month

    • Provides custody for accounting records’ storage available in accounts department

Comparison controls aims at ensuring that accounting records are checked effectively by;

  • Comparing the documents available with those outside the firm’s system

  • Comparing the documents that are produced in the system with those from differing system

  • Undertakes physical observation, for instance, perpetual inventory records

Documents control will ensure that accounting system operates effectively and minimizes the errors that may be perceived in the system. It includes;

  • Up-to-date organizational chart, the flow charts for the system, specifications of job’s manual and procedural manuals

  • Well-designed, pre-numbered, pre-printed and multi-copied documentations which will enhance precise recording of the transactions

  • Sequential numbering of the documents, document usage checks and control of the unused documents

Work Cited

Ulric Gelinas, Richard Dull. Accounting Information Systems. New York: Cengage Learning, 2009.