The Purpose of Internal Controls in the Accounting Process

Internal control is a specific process used in-house to improve the accuracy and reliability of accounting records by protecting assets from the theft, robbery, misuse of employees and reducing errors (Weygandt, Kimmel , Kieso, 2008). Throughout the industry, six principles are used as a standard for such control. They are responsible establishment, document separation, physical, mechanical and electronic management, independent internal verification, other management, first management, ie establishment of responsibility, assignment of responsibility to specific employees is.

Companies lacking internal controls are often more susceptible to ethical failures than companies with strong internal controls. When discussing our internal controls, we usually consider the accounting process, but it is equally important for internal control of computer systems, especially companies that manage products digitally. Creditors and financial institutions that rely on Equifax are considering applying for credit during this period and approving the loan. They are completely unaware that the application they are working on is illegal and may contain personal information stolen from Equifax. These companies can not consider whether other forms of identifying information are required to confirm that they are not handling credit applications for fraudsters.

Unlike financial accounting, control accounting is used for internal purposes only. Management accounting focuses on internal performance such as departments, projects, processes, etc. Financial reports focus on the enterprise as a whole. Management accounting helps administrators improve business processes, so that financial accounting helps investors make investment decisions. Management accountants tend to display reports and performance calculations, such as inventory turnover reports, summary of age of accounts receivable, or work efficiency reports. All of these reports and calculations will help the management judge what the company needs to change to improve specific production processes and departments.

Administrative (or administrative) accounting is used for internal reporting and decision-making purposes, including designing an information system to create a large number of detailed reports for specific internal users to monitor and manage the activities of the organization It will be. You can look forward to the future rather than the past and include subjective and detailed estimates and forecasts of future events and transactions. GAAP does not apply to management accounting, organizations can freely develop their own management accounting systems and measurement rules freely, most of which are original. However, the Sarbanes-Oxley Act of 2002 sets the minimum standards for internal reporting systems used by listed companies.