Accounting Internal Control

Accounting Internal Control
Accounting Finance

Accounting Internal Control

Definition of Accounting Control

Accounting Intenal controls is a technique that can help the company to manage the risk of the organization it can ensure that the financial records are as per the true financial condition. It also ensures that the quality of the accounts in an organization is met. Accounting control can help the organization and also their shareholders to draw a clear picture of the financial statement.

Explanation of Accounting Control

Accounting internal control helps to make proper and true and fair financial statements of an organization. The accounting control guards against the loss of assets. The accounting controls can also build fair financial results so that the organization’s cash flow can be known exactly.  The accounting controls help the stakeholders to plan their investment accordingly as per the organization’s financial position. The accounting control may not follow laws and regulations but it draws a clear picture of the finances. Accounting controls are different for each and every organization. There are mainly three types of accounting control i.e. Detective control, corrective control, and preventive controls.

Example of Accounting Control

In every big organization, regular auditing is done to make sure that all the loopholes are being corrected on time. The organizations also take good care of bank reconciliation on monthly basis. If the company has lots of transactions on daily basis then the bank reconciliation is done on an everyday basis. A team is also recruited for the physical verification of the inventories and the assets. Accounting internal control can also be achieved if the duties of the employees are segregated in a proper manner. The system of the organization i.e. all the computers, laptops, and software’s should be well protected with passwords. So that no one can make changes without prior consent. 

In a company, the accounting was being recorded in software know as Tally ERP 9. That accounting software was installed on every desktop of the company. Initially, that software was accessible to all the employees and the accountants were free to make any entries or changes in the accounting records. Now due to this, the trial balance keeps changing all the senior accountant finds it very difficult to make cash flows because the software was open to all and anyone can make changes to that. After understanding this problem the management decided to lock the software and only a few employees were authorized to make changes. The prior period entries were all locked and only after getting permission from the senior accountant the prior period entire can be changed. This is one classic example and practical example of accounting controls that is very helpful for organizations. 

An internal auditor also helps big organizations in achieving accounting controls. The internal auditors also make sure that excessive accounting controls are not misleading the organization. It has been seen that sometimes excess control leads to mismanagement and the employees can also get frustrated because they have to work in a specific manner.

Types of Accounting Control

The types of accounting internal controls are detective controls, preventive controls, and corrective controls. The steps involved in this accounting controls are as follows:-

  1. Detective controls: – Detective controls are a type of internal control that helps the organization in making the best possible ways to detect fraud and to take actions to control the accounting system. Detective control is considered to be an initial step towards the goal of an organization. By doing this detective control the quality control can be achieved. This helps the organization in bringing out the true and correct picture of the accounting.
  2. Preventive controls:Preventive controls come after the detective controls are over. Preventive control is implemented in an organization to reduce the threat of misconduct in recording the accounts. The preventive control helps to avoid the likelihood of fraud after the detection control has detected some possibility of fraud in the accounting system. This is the second step towards the accounting control which an organization is looking at.
  3. Corrective controls: – Corrective controls come as the last step to rectify the misdeed done. It helps to repair and maintain the damages which are may cause the system to get affected. Corrective controls also help in reducing the mistakes done before the preparation of the final accounts. Corrective control is done by the senior management by considering all the measures responsible for the accounting control in the organization. 

Skill (Short explanation)

To implement the accounting control expertise is required. The accountant having some specialized qualifications can understand the importance and the corrective measure of how to implement the accounting controls. Therefore this is done by an expert accountant in case of accounting controls with the consent of the senior management.


There are various accounting degrees that are persuaded by commerce students to gain expertise in this field.

  • B.Com (Bachelor’s in Commerce and Accounting).
  • Masters in Accounting.
  • Accounting associate degree.
  • Ph.D. in Accounting.
  • CPA degree. (Foreign degree)
  • Chartered Accountant.
  • MBA in Accounting.

The accountants gain knowledge and skills to make decisions regarding their accounting closure by each month-end which helps to make the accounting control better.


Accounting control is a technique that is helping all organizations significantly. The frauds occurring in the organization can be easily identified and also the person responsible for the same can also be identified initially. SOX i.e. Sarbanes Oxley Act provides certain guidelines regarding the accounting controls. The SOX also focuses on disclosure requirements since a proper disclosure is also a good accounting control practice. The accounting controls are being followed for a very long period of time. The accounting control can be a bit time-consuming a frustrating for the employees because they may not get proper space to work freely but it is also being seen that the accounting controls also help the organization by building up a proper system of accounting and which is also very much required nowadays. 

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