Accounting Ethics, Internal Control and Information Technology in Accounting
The final domain covers professional ethics, internal control over cash and stock, and the use of computerised accounting systems. Questions are usually short: identify an ethical threat, recommend a control, explain a weakness in a cash-handling system, or state an advantage and a risk of computerised accounting.
Ethics
Fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Threats to these principles include self-interest, self-review, advocacy, familiarity and intimidation. Safeguards include independent review, rotation of staff, and declining work where independence is compromised. Fraud is intentional deception; an error is unintentional; both are limited by good controls and detected by audit and reconciliation.
Cash and stock control
- Segregation of duties: the person receiving cash should not record it or prepare the bank reconciliation.
- Bank all receipts intact daily; make payments by cheque or approved transfer.
- Petty cash on the imprest system: fixed float, a voucher for every payment, reimbursement of exactly the vouchers to restore the float.
- Reconcile the bank account regularly, prepared by someone independent of the cashier.
- Stock: physical counts, stock records, reorder levels, restricted store access and authorised issue notes.
IT in accounting
Computerised systems post automatically from the books of original entry to the ledgers, maintain the trial balance continuously and generate reports quickly. Controls: passwords and access levels, an audit trail, regular backups, virus protection, disaster recovery plans and controls over the accuracy of input. Spreadsheets are useful but error-prone where formulas are unprotected or overwritten.
Worked example
Imprest float 100,000 FCFA. Vouchers total 62,000 and cash in hand is 36,000. Cash plus vouchers = 98,000, so 2,000 is missing; record it as a cash shortage and investigate. The reimbursement needed to restore the float is 100,000 − 36,000 = 64,000, made up of 62,000 of vouchers plus the 2,000 shortage. Reasoning: reimbursing only the vouchers would leave the float permanently short.
Traps
- Reimbursing only the vouchers so the float never returns to the imprest figure.
- Allowing one person to receive, record and bank cash.
- Assuming computerised records need no backups because posting is automatic.
- Describing an error as fraud, or failing to recognise a lack of segregation of duties as the weakness.