Page 247 - F1 - AB Integrated Workbook STUDENT 2018-19

Audit and financial control

Different books identify different categories of control activities. One possibility is:

Authorisation

Involves members of staff having to obtain approval from managers or other key
members of staff for various transactions. These could include expense claim forms,
purchases or cash transfers.

Comparison

Involves looking at analysis and reports in order to identify management or control
issues from past performance.

Computer controls

Tend to be of two separate types – general and application controls (see later).
Both are designed to ensure that computer systems operate as intended.

Arithmetic controls

These check for minor errors or frauds that would not otherwise have been
detected. Figures can be recalculated to check accuracy.

Maintaining a trial balance and control accounts

This will often enable the organisation to easily see if errors or frauds have
occurred by way of a simple review.

Accounts reconciliation

Receivable and payables ledger reconciliations and bank reconciliations are
useful tools in identifying errors and frauds and can be performed regularly.
Physical controls

These are often overlooked, but they are just as important as administrative or
accounting procedures. E.g. there is no point in having an efficient inventory
tracking system if there is inadequate security to prevent theft of high value
items.

Segregation of duties
This splits any given transaction into three elements: authorisation, recording
and maintaining custody of assets. This is a potentially effective means of
preventing fraud because it will require collusion between at least two staff
members.

Monitoring of controls is a process to assess the quality of internal
control performance over time. It involves assessing the design and
operation of controls on a timely basis and taking necessary corrective
actions.

241