Accounting Controls

Table of Contents

Definition

What are accounting controls?

Accounting controls are the processes and procedures organizations use to ensure accurate financial statements and reports. Accounting software often supports these controls, aiding in maintenance and consistency.

There are three types of accounting controls:

Detective Controls, which detect deviations from policies, errors, and employee misconduct through methods like inventory checks and audits
Preventive Controls are aimed at preventing inaccuracies by embedding strict guidelines within company policies, such as limiting management's role in financial statement preparation
Corrective Controls are employed to rectify and prevent future occurrences of issues identified by detective controls.

Accounting controls significantly enhance organizational efficiency by clarifying roles and streamlining processes, eliminating ambiguities. They bolster financial integrity through accurate data maintenance and promote transparency and accountability by providing traceable records of financial activities, safeguarding against inaccurate accusations.

The Sarbanes-Oxley Act, a regulation to prevent fraudulent financial reporting, highlights the importance of robust accounting controls. It is essential to understand that a firm's specific accounting controls can vary based on its business type and operational needs.

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Alyssa Towns

Alyssa Towns works in communications and change management and is a freelance writer for G2. She mainly writes SaaS, productivity, and career-adjacent content. In her spare time, Alyssa is either enjoying a new restaurant with her husband, playing with her Bengal cats Yeti and Yowie, adventuring outdoors, or reading a book from her TBR list.

Accounting Controls

What are accounting controls?

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