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: Internal Control - Accounting Information Systems - Essay Example

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Fraud is intentionally made while error is not intentionally made. Examples of fraud is theft of company assets such as cash and inventories and presentation of a financial statement that shows net income that is higher than what the real net income should be. An error occurs when the accounting clerk records payments for a $20,000 building repair as remainders and maintenance expense instead of capitalizing the cash paid with a debit to the building account and depreciation this amount over the of the remaining life of the building.
Administrative controls includes the plan of the organization and procedures and records concerned with decision processes leading to management's authorization of transactions that promotes operational efficiency and adherence to managerial policies.
Accounting controls comprises the plan of organization and the procedures and records that are concerned with the safeguarding of assets and reliability of financial records. It involves systems of authorization and approval controls over assets, internal audit and other financial functions.
1. The purchasing agent makes the purchase orders 2and then sends it to the supplier. The purchasing agent then gives copies to the department head, receiving department, and accounts payable & one copy is filed in the open requisition file.
requisition to approve the purchase order. ...
The purchasing agent could

intentionally make purchase

orders without

authorization because he or

she could send the purchase

requisition without approval

to the suppliers.
The purchasing agent

should attach the purchase

requisition to the purchase

order 3and indicate in the

purchase order the purchase

order number. Next, the

purchase agent should let

the department head who

gave the purchase

requisition to approve the purchase order. After this the purchase agent then gives the original copy to the supplier and DUPLICATE one duplicate copy will be given to the department head and one duplicate copy will be given to the receiving agent and another duplicate copy will be filed by the purchasing agent. The receiving clerk gives the purchasing clerk a facsimile copy of the receiving report indicating the number of items that the receiving department agent has actually received.
2.The receiving department gets a copy of each purchase order. When equipment is received, that copy of the purchase order is stamped with the date and, if applicable, any differences between the quantity order and the quantity received are noted in red ink. The receiving clerk then forwards the stamped purchase order and equipment to the requisitioning department head and verbally notifies the purchasing department that the goods were received.
There is a possibility that the purchasing clerk will receive more items than what is indicated in the approved purchase order. The verbal informing by the receiving department to the purchasing agent is very weak because the purchasing agent may deny in the future that the receiving department informed him or her that the items ordered had already been received thereby the possibility of double order of the same items ...Show more
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Summary

Internal control1 comprises the plan of organization and all the coordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies.
: Internal Control - Accounting Information Systems
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