Wednesday, February 26, 2020
Internal Control of Accounting System Essay Example | Topics and Well Written Essays - 2000 words
Internal Control of Accounting System - Essay Example The propensity for loss is great irrespective of the nature of the fraudulent activity. Fraud threatens the stability of a business as it leads to significant financial losses. According to Association of Certified Fraud Examiners, employee theft accounts for 7% of typical businesses losses (Chorafas, 2001). Accounting professionals are the trusted advisors for business clients. It is upon the accountants to educate business clients about the risks associated with fraud, and the significance of good internal controls and how to implement internal controls. This paper discusses suggestions for overcoming the lack of segregation of duties that are often present in small businesses due to inadequate staff. The paper further explains the important role business owners and independent accountants play in creating a good internal control environment. The paper discusses red flags, which may be indications of fraud along with several reports that are helpful in monitoring and reviewing financial records (Vona, 2011). The accounting system offers businesses with a constant way in which to use their data and financial material. A system of control is essential as it controls the three key partitions within the accounting system. These segments include the design, analysis, and implementation. Internal control is a system within a system and it plays a major role in the success of the accounting system.Ã An accounting system controls businesses from fraud and abuse by ensuring that information employees relay timely and accurate information and that all the accounting processes meet set regulatory requirements. This paper discusses how internal controls are set and how the control system functions (Basingstoke, 2004).