internal control and accounting systems - learning area ... - AAT

Internal Control andAccounting SystemsLearning Area OverviewWelcome to this learning area overview for InternalControl and Accounting Systems, prepared by AAT.In this overview we’ll explain what Internal Control andAccounting Systems is all about, and how it fits into thebigger picture of the AAT Accounting Qualification.We’ll explore the main topics you can expect to cover,and how the knowledge and skills you’ll pick up will beof practical use to you in the workplace.Finally, we’ll explain how this learning area relates tothe others you’ve already studied, and those you’llstudy in the future.What you’ll learn in Internal Controland Accounting SystemsIn Internal Control and Accounting Systems you’ll learnhow to identify good accounting systems. You’ll learnhow to review and evaluate record keeping and internalcontrol systems, identify areas of weakness and judgehow vulnerable an accounting system is to fraud.You’ll then be able to make justifiable and costedrecommendations for improvement, and show that youcan report formally on your findings.There are eight main topics in Internal Control andAccounting Systems.The first is record keeping systems, including thepurpose of financial reports and how well theorganisation’s current reports meet its needs.The next topic covers internal systems of control. You’llexamine how internal controls support the accountingsystem, the types of control that are in place and anythat may be missing.You’ll learn about training within an organisation in thefifth topic, developing your knowledge about how it canbe used to support staff.Topic six covers weaknesses. Once you’ve reviewed asystem you should be able to identify its weaknesses,explain them clearly and outline what impact theycould have on the organisation.Following on from weaknesses, the seventh topic willsee you recommend improvements to eliminate thoseweaknesses.For each weakness you highlight you should provide acorresponding recommendation for improvement,concentrating on the effect they would have on boththe organisation as a whole and individual members ofstaff. For example, your recommendations mightinclude training needs or aids to improve staffperformance.The eighth and final topic concerns the cost benefitanalysis. At least one of the recommendations youmake should be subject to a cost benefit analysis.While not all benefits are quantifiable, all costs are –and you should make any necessary assumptions or“guesstimates” to allocate costs to such items as time,unknown salaries, or any other unknown expenseinvolved in your recommended changes.You should identify all benefits, including those forwhich you can’t allocate a financial figure. Suchbenefits can include things like improved customerrelationships, improved documentation systems or staffmorale.The third topic looks at the various implications of fraudand how to prevent it. You’ll develop an awareness ofthe causes of fraud; common types of fraud; whatmethods to use to detect fraud; and potential areas forfraud within the organisation.The fourth topic is concerned with working methods andpractices. For example, you’ll learn how to evaluatecomputer software, and the organisation’s operatingmethods in terms of reliability, speed and costeffectiveness.

How Internal Control and Accounting Systemswill help you in the workplaceThe skills you gain in Internal Control and AccountingSystems are used in many accounting roles. Theyinclude accounts office supervisors, accountingtechnicians working on clients’ systems, credit controlmanagers, internal audit assistants and any otheraccounts role where an ad hoc task of reviewingsystems is needed.For example, you might have a client who asks you toset up a new accounting system. In such a case you’dneed to be able to consider record keeping systems,internal control and how to reduce the possibility offraud.Or you may be asked to review an existing accountingsystem, or a part of that system, which would meanyou’d need to consider the points we’ve mentioned hereand make recommendations for improvements.How Internal Control and Accounting Systemsrelates to other learning areasIn addition to Internal Control and Accounting Systems,you’ll need to take three other compulsory learningareas at level 4. These are:• Financial Statements• Budgeting• Financial Performance.There are also four optional learning areas at level 4,of which you’ll need to take two:• External Auditing• Credit Management and Control• Personal Tax• Business Tax.Internal Control and Accounting Systems relates veryclosely to some of the compulsory and optionallearning areas at this level.You’ll need a good knowledge of financial statementsto ensure you can review the record keeping systemsin an organisation.Both budgetary control and financial performance areareas of accounting systems that you might need toreview in order to identify weaknesses that needimproving.The optional areas of External Auditing and CreditManagement and Control relate very closely to InternalControl and Accounting Systems.Auditing can highlight weaknesses in internal controlsystems, while examining credit management canexpose vulnerabilities which your recommendationsmay be able to improve.Internal Control and Accounting Systems also followson from the level 2 learning area, Working Effectivelyin Accounting and Finance. This is because you’ll needto be able to communicate the findings of your revieweffectively in a written report.Internal Control and Accounting Systems also buildsupon Basic Accounting at level 2, and AccountsPreparation at level 3, as you need to understand theaccounting system to review the record keeping andinternal systems of control.