Why do you need Internal Control in Accounting System?

What is internal control in accounting system and why is it needed?  Internal control in accounting and auditing, is a process for assuring achievement of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.  You need to have strong internal control mechanism in order to protect your assets from any internal manipulation by people involved in the business.

What are the key Internal Control in accounting system?

Why do you need internal control in accounting system

Separation of Duties.

You should create a policy where bookkeeping, deposits, reporting and auditing are handled by separate individuals. This should be done to avoid any employee from committing fraudulent acts or manipulating your accounting data. If your business is still small you can create a check and balance mechanism where critical tasks are to be reviewed by co-workers.

Access Controls.

This is a mechanism to monitor and secure your accounting system.  When using computerized accounting systems like MYOB or QuickBooks it is important that you create passwords, lockouts and other electronic access logs which can prevent access from unauthorized users and also provide a way to review usage of the system.

Physical Audits.

Actual count of assets need to be done in a timely manner.  This manual counting includes hand-counting of cash and any physical assets tracked in the system which include inventory, materials and tools.  This internal control in accounting system seeks provides the reconciliation of any discrepancies in account balances.  Setup a regular schedule for doing this or you can also make a surprise physical audit when needed.


Create standard documents for your accounting system.  It is not only professional to do it but it also prevents forgery of documents.  Invoices, internal materials requests, inventory receipts, expense reports, check invoices and other documents need to be given the authentic branding of the company to maintain consistency.  .

Trial Balances.  Whether you are using a manual accounting system or a computerized accounting system like Sage50, you should always use the double-entry accounting system. This adds reliability since the books are always balanced.  You should produce a weekly and monthly trial balance in order to provide a regular assessment of your accounting system.  Once you discover any discrepancy or error you can immediately remedy it.


Reconcile balances in your account specially cash in bank, cash on hand and checking accounts.  This will ensure that balances in your accounts are timely and accurate.  Your should also check your outstanding receivables from customers and determine if they are still collectible or not.  Internal control in accounting system requires that your balances are realistic and accurate.

Approval Authority.

Be sure that approval is given to any material transactions in your business.  For example, payment of large amounts of loan, granting loans to customers or purchase of new assets may require certain officers of the company to approve it.  Requiring approval for large payments and expenses can prevent unscrupulous employees from making large fraudulent transactions with company funds, for example.

These internal controls in your accounting system are usually present in all computerized accounting systems.  You can check out our various accounting products which can help you grow your business and protect your investments. Send us a message for questions or inquiries.