Internal Control: Accounting Administrative Controls

Accounting administrative controls is the most effective way of internal control. Internal control areas spread over accounting and non-accounting spheres. Internal control, as it applied to accounting system, implies control over accounting system with the aim of achieving the following objectives:

Objectives of accounting administrative controls

  1. Efficient and orderly conduct of accounting transactions.
  2. Safeguarding the assets in adherence to management policy.
  3. Prevention of error, detection of error.
  4. Prevention of fraud, detection of fraud.
  5. Ensuring accuracy, completeness, reliability and timely preparation of accounting data.

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On the other hand administrative controls seek to achieve the aim of management in efficient and orderly conduct of transactions; in mon-accounting areas. It seeks to ensure the adherence to management policy in. various areas of business operations.

For example, in a manufacturing system of a business enterprise, the internal control may be established to ensure the adherence of management policy as to quality (quality control) safeguarding assets (control over wastage, ABC control over raw materials) prevention of errors (monitoring production methods, maintenance program for machines), prevention of frauds (security system) and timely .supply of reliable management information system (MIS).

An auditor is mainly concerned with good accounting control of internal control system. If good internal control system exists in accounting system, an auditor can put greater reliance on the financial data generated in the system with test checking of select items.

If the accounting control is not strong, the auditor may have to resort to detailed checking of transactions, events and practices in the accounting system. With regard to administrative controls, the auditor may evaluate those part of administrative controls as may have bearing on the financial information of the entity.

For example before certifying the valuation of stocks, the auditor may refer to the reports of consumption patterns prepared by manufacturing segment to administration, if the auditor feels material discrepancy in physical quantity of stocks.

On the other hand, he may not be concerned no more than a matter of general interest with the quality report of chemical A used in operation X.

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