Importance Of Internal Controls In The Accounting Information System

Many people mistakenly believe that the greatest risks companies face are from outsiders. However, studies have shown that internal risks are far greater and more frequent than external risks. Many companies have not only lost billions of dollars but have also perished under the weight of internal unethical activities. A popular example of an organization that crashed due to poor Internal Controls is Enron. In the world today, Manual systems are constantly being replaced by Accounting Information systems (AIS). Even though AIS is extremely important to all organizations, it also brings with it, its own unique set of problems. To mitigate the risks and minimize the possibility of fraud or errors, an organization must have effective internal controls.
According to the online business glossary, ‘Internal control is the plan of an organization and all the methods and measures used by a business to monitor assets, prevent fraud, minimize errors, verify the correctness and reliability of accounting data, promote operational efficiency, and ensure that established managerial policies are followed’. (Retrieved from http://www.allbusiness.com/glossaries/internal-control/4943791-1.html)
Internal Controls must assist the accounting information system in reaching its objectives. It must not hinder the organization in any way. The concepts must be woven into the day-to-day responsibilities of managers and their staff and also into the AIS of the organization.
BENEFITS OF INTERNAL CONTROL
There are numerous benefits of having an effective Internal Control in place in an organization. Apart from making sure that the company does not lose money because of different types of theft or misappropriation of information, Internal Control helps to ensu...

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...endent employee. This verification could be done periodically or on a surprise basis and all discrepancies and exceptions noted during verification must be reported for corrective action.
Human Resources also has a part to play in Internal Control. Thorough background checks must be carried out on all employees. HR must verify all the records provided by the job applicants and must also be on the lookout for past offences or past records. Ensuring that only trained, trustworthy, knowledgeable and competent personnel access the accounting information system to perform tasks prevents errors, irregularities and fraud. Also, Human Resources must make it a point of duty to rotate shifts, employee duties and require employees to take vacations. Many organizations have discovered several unethical practices when an employee was on vacation or assigned to a new position.