Accounting control system ensures accuracy and reliability of information required by management for decision making. Accuracy and reliability of information is a prerequisite for management especially when an organization start becoming complex. Reliability and accuracy of information depends on how well the information reflects the economic events which t is based on (ACC, 2014). The financial statements should reflect the fair view of the status of the organization. This means that they have to be accurate. This accuracy can be verified through audit function, accounting information system and the internal controls. A Board of Education is part the management in the education organization or a school. Owing to the complexity of the organization, proper controls have to be put in place. High level of integrity is required and thus inevitable to maintain a strong control system.
Although audit function and internal control system can be independently used to ensure accuracy and reliability of financial information, the internal control system can be used in the review of the organizations records (ACC, 2014). The internal control system are designed by the management of an organization to protect the stakeholders wealth by protecting the assets, increase and promote efficiency in operations, ensure that the organizations laws, regulations and policies are followed to the letter on top of provision of reliable and accurate information. The board of education therefore needs to establish the necessary controls to for the organizational goals to be achieved. The controls are meant to give reasonable assurance to the management that the organization is headed to the intended direction (AICPA, 1998). Internal controls comprises of specific procedures and policies as they may be formulated by the management.
Coming up with internal controls in an organization is not the only prerequisite. The Sarbanes-Oxley Act of 2002 requires the organization to document and implement internal control system (ACC 2014). It also demands a consistent monitoring and audit of the internal control systems. This ensures the internal controls remain up to date and are effective in prevention of fraud. This act stipulates that it is the role of the management to design and implement the internal controls. It is therefore mandatory by the law for the Board of Education to actively get involved in overseeing proper internal controls especially where changes in the organization are put to effect. In adherence to section 302 and 404 of the act, the Board of Education management will have to be educated and trained on control systems so as to be in a position to comprehend all its security aspects (Moeller, 2010). This will enable them to identify all its areas of weaknesses which require alleviation and its strengths for maintenance and sustenance. This helps them to meet their legal requirement by the act of disclosing all the deficiencies of the internal control system to the external auditor. The Board of Education internal controls system also needs to be reviewed for possible malfunctions.
Since the automated accounting system of the organization has been in place for several years, it is prudent for the Board of Education management to review the system for obsolesce. The management will then commit to install the latest operating system and other application software to reduce chances of breakdown and failure of the internal controls. The management will also review the system security policies to minimize external threats (Moeller, 2010). This will be done by subjecting the system to authorized entry, maintaining a system back up as well as ensuring that the physical computer equipment are safe within the premises of the organization. The Sarbanes-Oxlay and Internal Control Act will therefore streamline the internal control system of the Board of Education and keep its management alert and in constant commitment to improve them and detect and stop frauds which may threaten the performance of the organization.
Where accounting systems are put in place and are in use it is important for the auditor to carry out audit around or through the computer. Auditing around the computer is an audit approach where the auditor reconciles the input and the output of the system to without necessarily auditing the processing part of the system (Moeller, 2010). Through this approach, the auditor draws evidence and reach to conclusion without considering the processing of the inputs into outputs. It is popularly referred to as the black box audit approach. This audit approach motivates the management the Board of Education to maintain proper controls to ensure the output is accurate and reliable so that the auditor may draw confidence from auditing around the computer which is cheaper.
Auditing through a computer is an audit approach which focuses on evaluation and testing of the processing procedure of the input, the programming logic, programmed controls and edit routines. The general assumption in this approach is that if the programs work as designed then it is reasonable to accept and rely on the output (AICPA, 1998). The Board of Education therefore needs to document its systems and controls to allow auditors perform their duties and give unqualified report. This will be consistent with the provisions of Sarbanes-Oxlay and Internal Control Act.
References
ACC (2014). Information System and Auditing. Lecture notes ACC/340 Week Five.
American Institute of Certified Public Accountants. (1980). Audit approaches for a computerized inventory system: Computer services guidelines. New York: American Institute of Certified Public Accountants.
Moeller, R. R. (2010). IT audit, control, and security. Hoboken, N.J: Wiley.
