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Accounting functions, including support for internal control
over 1 year ago

Accounting to control risks


The first function of accounting audit is to present the patrimonial and financial situation of an organization, thanks to the regular recording of economic operations. The aggregation of accounting entries makes it possible to establish the balance sheet, that is, the assets and liabilities of the entity, and the income statement which lists all the charges and income recorded during the financial year. Without forgetting the appendix, which includes off-balance sheet commitments extracted from the company's accounts. Thus, with financial statements, any stakeholder can know about an organization what it has, what it owes, what it gains - or loses -, what it is committed to. But accounting is not only the quantified reflection of an economic and financial reality. It is also a raw material for steering activities by fueling budget control. It is also, even if you think less about it, a very good tool for internal control, therefore for risk management. Accounting finally, informs the internal auditors in UAE about current affairs and exceptional events concerning their organization, thus allowing them to refine the preparation of their missions contributing to risk management.


Accounting to meet internal control objectives


Accounting is a relevant tool for risk management since its use makes it possible to meet internal control objectives. There are four of them, and for each the accounting resource is not useless:


Compliance: internal control must make it possible to minimize the risk of compliance, that is to say that laws and other regulatory texts are respected within the organization, but also internal standards such as procedures and operating methods. As such, concerning the processes, the accounting identifies operational claims, therefore provides feedback on compliance with the rules set by the organization.


Protection of assets: control mechanisms are put in place to protect the organization's assets, whether intangible, material, financial or commercial. As the balance sheet shows everything that is held by the organization, the accounts are then an exhaustive basis for identifying the assets to be protected, with regard to fixed assets, receivables and cash.


Effectiveness and efficiency: internal control does not sanction, on the contrary it secures. It also serves to steer activities, by identifying the actions to be taken to achieve objectives at lower cost by the departments. This exercise requires comparing budget items with the actual situation, which accounting allows.


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Quality of information: reporting processes are essential for an organization because information conditions decisions. Poorly informed, the leaders are not in the best position to decide for the best. With accounting, by framing with operational data, it is possible to ensure that the reports from the management tools are exhaustive, which is not bad!

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