IBM 1130 User Manual page 107

Review of Accounting Control Principles
Accounting controls are an essential part of your
data processing installation. The inherent accuracy
of data processing equipment and the elimination of
many error-prone clerical steps helps reduce the
number of errors in processing; however, good
accountingpractice requires that you have a precise
procedure available to prove and reconstruct the
basic records of the system. Controls are also
necessary to guard the records of your bu~iness
against fraudulent acts.
The accompanying exhibit shows a typical in-
formation flow through a system. Information
from source documents is punched into cards. The
first control (AI) ensures that your information was
transcribed correctly and completely. This can be
determined in one of several ways:
1. The cards can be key-verified.
2. Control totals from the source documents can
be balanced against the cOard totals. For example,
an adding machine total of the quantities on a batch
(several source documents) can be balanced against
the total of the quantities in the cards created from
the documents., This same technique can be used
to control other numeric fields, such as employee
number, part number, etc. The total is often
called a "hash" total. If an out-of-balance condi-
tion occurs, a listing of the cards provides a means
of comparing the card information with the source
documents, and the error is quickly isolated and
corrected.
3. Document or transaction counts can be used
to ensure that a card document is created for every
trans ac tion.
Since the information in the cards will be used
to update several associated records, accuracy is
of prime importance.
At the time the cards are run through the system
for accumulating control or hash totals, other tests
can be performed.
Fields may be tested for size or reasonableness.
For example, the nature of your business may be
such that the quantities have reasonable limits,
based on the class of an item. Any item exceed-
ing the limit can be so noted for review before
processing. This type of test might keep you,
for instance, from shipping 24 bathtubs to a small
country store as a result of mispunching an item
number for pliers.
Batch size (the number of documents included
in a control group) should be small enough to keep
error tracing from becoming too cumbersome. On
Section
Subsections Page
20 10
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10 01
the other hand, it is not reasonable to control each
document separately.
As the documents enter the process (A2) , the
same control list above can be used on a cumulative
basis to ensure that all the cards from the several
batches that constitute a processing run are com-
pletely processed.
Card documents being created by the process
can be balanced against your control (A3) totals.
A control should be maintained on all card files
(A4) . The total from (A3) will be used to update
this control as cards enter the file. Before proces-
Sing a large card file, it is often advisable to run
a trial balance on the file--particularly if the file
is being updated or used as a source of reference
between processing runs. The purpose of this trial
balance is to catch errors in filing, missing cards,
duplicate cards where a change was made but the old
record was not removed, etc.
A control listing of all cards entering and leaving
the file establishes the control total entry and pro-
vides an audit trail if it is necessary to identify
lost or duplicate records.
The accompanying exhibit also shows an example
of a simple control sheet. Each time records enter
the file or are removed, an appropriate entry is
made and the file balance is updated.
It
is often possible to provide audit requirements
as a by-product of creating normal reports. For
example, the trial balance of your file might be a
stock status report. The value of separate balancing
runs must be determined by experience for each
application and will vary with the experience and
capability of your operating personnel.
The number and types of controls will depend
a great deal on the application. Your own auditors
should be consulted in determining control proce-
dures. Controls and audit trails should conform
with their requirements and should be established
as an integral part of the data processing proce-
dure. Much of the material in subsection 20.10.20
will help you and your auditors design adequate
control forms.
In setting up controls that will operate success-
fully, the following should be kept in mind:
1. Only those controls that satisfy a need
should be included.
2. The overall system of controls should be
conceived and arranged for when procedures are
being planned. Thus they will be an integral part
of each procedure, and those areas that may have
a tendency to be overcontrolled or undercontrolled
will be spotted.