AIS Internal Controls PDF

AIS Internal Controls Proud to be RTUian  Internal Control System Administrative Controls Accounting Controls - the plan of the - the plan of the organization and the organization and the methods and methods and procedures to procedures used to pr...

AIS Internal Controls Proud to be RTUian  Internal Control System Administrative Controls Accounting Controls - the plan of the - the plan of the organization and the organization and the methods and methods and procedures to procedures used to promote operational safeguard assets and to efficiency and check the reliability of encourage adherence accounting data. to prescribed - AIS Controls: managerial policies. > General Controls > Application Controls  General Controls 1. Organizational controls 2. Sound personnel practices 3. Standard operating procedures 4. Systems development controls 5. Documentation controls 6. Hardware controls 7. System software controls 8. Systems security controls Proud to be RTUian  Module 3 General Controls (1) Proud to be RTUian 1. Organizational Controls (Plan of Organization) - relate to the segregation of duties in order to reduce error or fraud: 1. segregation of EDP and user functions 2. segregation of functions within EDP 3. segregation of functions among users Proud to be RTUian 1. Segregation of EDP and User Functions a. Error detection, correction and resubmission b. Segregation of incompatible functions Proud to be RTUian 1. a Error detection, correction and resubmission > systems tests performed during systems development ensures the elimination of errors, > when errors occur, generally, they are corrected and resubmitted at source. Proud to be RTUian 1.b. Segregation of Incompatible functions i. Authorization ii. Execution iii. Accountability Proud to be RTUian  1.b. Segregation of Incompatible functions i. Authorization - as a general rule, IT should not be permitted to authorize transactions; however, some authorization functions are incorporated in the computer program - examples: materials reordering system, customer order processing Proud to be RTUian  1.b. Segregation of Incompatible functions ii. Execution - steps in the transaction processing cycles and changes to master files are to be performed by the users; today, execution is done automatically through instructions in the program - examples: systems- generated financial entries, automatic reversing entries Proud to be RTUian  1.b. Segregation of Incompatible functions iii Accountability - EDP should not have custody of non-EDP assets - access is normally indirect, e.g., the computer program contains the instructions to release inventory for shipment Proud to be RTUian 1. Organizational Controls (Plan of Organization) - relate to the segregation of duties in order to reduce error or fraud: 1. segregation of EDP and user functions 2. segregation of functions within EDP 3. segregation of functions among users Proud to be RTUian 2. Segregation of functions within EDP a. Systems Development > Systems Analysis > Application Programming > Systems Programming b. Operations c. Data base administration > Independent librarian function Proud to be RTUian 1. Organizational Controls (Plan of Organization) - relate to the segregation of duties in order to reduce error or fraud: 1. segregation of EDP and user functions 2. segregation of functions within EDP 3. segregation of functions among users Proud to be RTUian  Transaction Sales Credit Whouse Shipping Billing A/R Preparing the Sales Order X Obtaining credit approval X Releasing the merchandise X to shipping Preparing the Bill of Lading X Shipping the merchandise X Billing X Entering in the sales X journal Posting customer's account X in the GL Compensatory controls - generally manual controls, that are performed to compensate for the internal control weakness arising from the non-segregation of duties. > review and approval of purchase orders by Purchasing Department > review of exception lists from credit approval runs  Module 3 General Controls (2) Proud to be RTUian  General Controls 1. Organizational controls 2. Sound personnel practices 3. Standard operating procedures 4. Systems development controls 5. Documentation controls 6. Hardware controls 7. System software controls 8. Systems security controls Proud to be RTUian 2. Sound Personnel Practices - provide control over the quality of work by ensuring that personnel are competent and honest - provide policies that encourages compliance Proud to be RTUian 2. Sound Personnel Practices a) Hiring and evaluation of Personnel i Hiring test > mostly behavioral and personality tests ii Background check > checking of character references, recommendations from previous employers, NBI and police clearances iii Fidelity bonds Proud to be RTUian  2. Sound Personnel Practices b) Personnel scheduling - Irregularities maybe discovered during an employee’s absence. c) Rotation of duties - Enable the employee to master other tasks, thus, effectiveness is improved. - When a task is performed by another, opportunities for improvement can be identified. Proud to be RTUian 2. Sound Personnel Practices d) Performance Evaluation - a tool to identify strengths and areas of improvement. - a good basis for rewards and remunerations. e) Training and Development - enhances employee performance and potential for more responsible roles. - CPE Proud to be RTUian 2. Sound Personnel Practices f) Career Path - a tool to formalize target positions - helps identify training needs - encourages loyalty and dedication g) Rewards and Remuneration - induces employees to perform their best Proud to be RTUian 2. Sound Personnel Practices h) Formalization of Personnel Practices - conveys the company’s sincerity to its commitments i) Psychological Control - employees tend to display positive behavior if it goes with a reward or punishment as the case may be Proud to be RTUian