General Controls: Definition and Importance
General controls are crucial components within the realm of computer-based accounting systems. Unlike application controls that focus on specific programs, general controls are overarching mechanisms that relate to the entire environment within which these systems operate. They aim to ensure:
- Proper development and implementation of applications: Providing a structured framework that supports the secure and efficient creation and deployment of software applications.
- Integrity of program and data files: Promoting consistent accuracy and reliability of data processed by accounting systems.
These controls are applicable across all applications within an organization to offer a broad safeguard against errors and potential fraud.
Examples of General Controls
- System Access Controls: Mechanisms ensuring only authorized personnel can access certain systems, preventing unauthorized access to sensitive data.
- Change Management Processes: Procedures to manage changes in system software, preventing unauthorized changes and ensuring all modifications are documented.
- Backup and Recovery: Regular backup of data and programs and maintaining disaster recovery plans to safeguard against data loss.
- Data Center and Network Operations: Ensuring secure physical and environmental conditions within data centers, such as restricted access, proper cooling, and fire suppression systems.
- Segregation of Duties: Dividing responsibilities among different personnel to reduce the risk of error or inappropriate activities.
Frequently Asked Questions (FAQs)
What are the main objectives of general controls?
The primary objectives are to ensure appropriate development, implementation, and operation of accounting systems and to maintain the integrity and security of data and application programs.
How do general controls differ from application controls?
General controls apply broadly to the entire information system environment, whereas application controls are specific to individual software application programs, focusing on data accuracy and proper function.
Why are backup and recovery considered part of general controls?
Backup and recovery procedures ensure that data can be restored in the event of hardware failure, data corruption, or other incidents, thus maintaining data integrity and availability.
How does ‘Segregation of Duties’ contribute to internal controls?
By distributing tasks and responsibilities among different personnel, it minimizes risks of errors, fraud, or misuse of system processes.
Related Terms
- Application Controls: Specific controls embedded within software applications to ensure data accuracy and proper functioning.
- Internal Controls: Mechanisms and processes implemented within an organization to ensure the integrity of financial reporting, compliance with laws and regulations, and efficient operations.
- Information Security: Measures taken to protect electronic data from unauthorized access, disclosure, modification, or destruction.
- Change Management: Procedural controls ensuring all changes to IT systems are identified, evaluated, approved, and documented.
Online Resources
- Institute of Internal Auditors - General Controls
- ISACA - General Controls
- IFAC - Information Technology in the Accounting Curriculum
Suggested Books for Further Studies
- Information Technology Control and Audit by Sandra Senft and Frederick Gallegos
- Principles of Internal Control and Corporate Governance by Alan Trenerry
- Accounting Information Systems by Marshall B. Romney and Paul J. Steinbart
- Internal Controls and Sarbanes-Oxley: Leading Practices and Approaches by Robert R. Moeller
Accounting Basics: “General Controls” Fundamentals Quiz
Thank you for exploring the essential aspects and safeguards provided by general controls in accounting information systems through our comprehensive examples, FAQs, and our insightful quiz! For more in-depth knowledge, refer to our suggested books and online resources.