The Dual Purpose of Internal Accounting Controls

Many internal accounting controls consist of forms to submit and procedures to follow in authorizing and executing transactions and operations. A business's accounting department records the financial activities and transactions. So, naturally, the accounting department is put in charge of designing and enforcing many core internal controls.

Many accounting internal controls have a dual purpose:

  • To detect and prevent both errors and fraud: For example, employees can be required to punch their timecards on a work clock as they start and end each day, or they can have their hours entered in a payroll log signed by their supervisor. This sort of internal control helps prevent employees from being paid for time they didn't work.

  • To ensure that the amounts posted to the accounting records are reliable: The clock-in procedure also tells the accountant which expense account to charge for each employee's time worked and produces a record of the transaction that helps eliminate (or at least minimize) errors in processing the wage data needed for financial records.

    The accounting system of a business keeps track of the large amount of information needed in operating a business, and these internal controls are designed to ensure the accuracy, completeness, and timeliness of information held in the accounting system.

Internal accounting controls need to be kept up-to-date with changes in a business's accounting system and procedures. For example, an entirely new set of internal controls had to be developed and installed as businesses converted to computer-based accounting systems.

The transition to computer and Internet-based accounting systems brought about a whole new set of internal accounting controls, to say nothing of all the other internal controls a business had to install to secure its databases and communications.

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