Westpac Case Study: Internal Controls in Accounting Information

This essay details control measures that accountants and bankers can implement to reduce transaction errors and prevent their recurrence in banking systems. It identifies preventive, detective, and corrective internal controls. Preventive controls include clerical accuracy testing, computer data backup, and employee screening and training. Detective controls involve inventory checking, transaction approval, and job description enforcement. Corrective controls include reporting errors to supervisors, undergoing training programs, and progressive discipline. The essay concludes that financial institutions should employ these mechanisms to control transaction errors.

Running head: ACCOUNTING INFORMATION SYSTEM 1
Accounting information system
Name
Institution

ACCOUNTING INFORMATION SYSTEM 2
Abstract
The content of these term paper entails in details the control measures to be put in place by the
accountants or bankers in order to reduce the likelihood of errors occurring in times of the
transaction process and to prevent their occurrence again in the banking system.
The identified control measure to be undertaken by the financial in situation to avoid future
occurrence of such error includes the preventive internal control, detective internal control and
corrective internal control.
Preventive internal control
These are internal controls set aside by the management of the financial institutions like banks
to prevent occurrence of errors and irregularities in the near future. The management of the
financial institutions like banks where there is large transactions of money is required to design
some of the preventive internal control strategies to prevent occurrence of such errors like testing
for the clerical accuracy, backing up computer data and employees screening and training
programs. (Guo, Huang, Zhang & Zhou, 2015, pg. 1192).
Backing up of the computer data is very important to the financial institutions since in times
of software breakdown, all transactions done using that particular software can be retrieved from
the manually backed up data hence there will be no loss of useful transaction in formation.
Training of the employees based on professional practices they are required to perform which
enables the accountants and the cashiers to be more professional and keen while performing their
duties hence avoids transaction error cases.

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Detective internal control system
These are designed techniques used in the financial institutions to aid in detecting errors that
have occurred during the transaction process. They serve as the checks- and-balances system
thus determining the efficiency of the policies applied by the firm. Such detective control system
includes inventory checking, approval of the accounting transaction performed by the cashier
and also enforcement of job description and expectations. (Newton, Persellin, Wang & Wilkins,
2015, pg613).
Inventory checking by the manager ill help the management to identify the errors that have
occurred since institution inventories are recorded upon their purchases thus providing clear
records on the transactions on the inventories.
Approval of the accounting transaction by the manger in most of the financial institution is a
better internal detective control as managers will be able to identify or detect some of the
unrealized errors done by the cashier thereby correcting such errors before authorizing
completion of that particular erratic transaction. (Lisic, Neal, Zhang & Zhang, 2016, pg. 1201).
Corrective internal control
Corrective internal control system are the mechanisms that are put in place by the
management of the financial institution with an aim of correcting transaction error arising from
the activities of their employed in the line of performing their assigned task. It is advisable that
when an error is made by the employee, a corrective channel set aside by the management such
as reporting the error made to the supervisor, going through training programs and progressive
discipline for errors should be followed.

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Reporting the problem to the supervisor or the manager is the best procedure for an employee
to follow upon occurrence of an error so as to get the best action or corrective instructions on
how they can correct that particular error. (Gao & Jia, 2016, pg. 813).
Going through progressive training program by the employee ill help to sharpen and improve
their knowledge and skills concerning that particular task assigned to him by the manager or
supervisor. By acquiring additional professional training, it will improve the employee
competency in work as they will deliver their best in terms of skills and experience needed for
that assigned task. (DeFond & Lennox, 2017, pg. 591).
Conclusion
The above discussed control mechanism in reducing the likelihood of future occurrence of
error arising from the action of the employees, should be employed by the financial institution to
help them control occurrence of transaction errors within the firm.

ACCOUNTING INFORMATION SYSTEM 5
References
DeFond, M. L., & Lennox, C. S. (2017). Do PCAOB inspections improve the quality of internal
control audits? Journal of Accounting Research, 55(3), 591-627.
Gao, X., & Jia, Y. (2016). Internal control over financial reporting and the safeguarding of
corporate resources: Evidence from the value of cash holdings. Contemporary Accounting
Research, 33(2), 783-814.
Guo, J., Huang, P., Zhang, Y., & Zhou, N. (2015). The effect of employee treatment policies on
internal control weaknesses and financial restatements. The Accounting Review, 91(4), 1167-
1194.
Lisic, L. L., Neal, T. L., Zhang, I. X., & Zhang, Y. (2016). CEO power, internal control quality,
and audit committee effectiveness in substance versus in form. Contemporary Accounting
Research, 33(3), 1199-1237.
Newton, N. J., Persellin, J. S., Wang, D., & Wilkins, M. S. (2015). Internal control opinion
shopping and audit market competition. The Accounting Review, 91(2), 603-623.