The Risks Faced By The Accounting System Of A Company And The Ways To Mitigate Those Risks (Essay Sample)

THE RISKS FACED BY THE ACCOUNTING SYSTEM OF A COMPANY AND THE WAYS TO MITIGATE THOSE RISKS
NAME
MARCH 2017
Introduction
The introduction of the digital or computerized accounting information systems in many financial institutions in recent years has been at the rise due to the great and many advantages which they posses which are known to be beneficial to the involved company. The migration from manual accounting systems which involved the use of books to keep the accounting records and also taking the sums using manual ways has been spearheaded by the heads of the companies in their quest to have swift and efficient accounting systems. The manual accounting books are prone to many errors which always could lead to loss of money and also which could be very difficult to detect ad correct at the same time. The manual accounting also is well known of the bulk of work involved in them. There are so many books which need to be kept so as to keep updated records and ensure that all the records of the transactions involved in all the activities of the company are recorded. The manual work of accounting systems were also subject to human errors like duplicate entries or a person could be tired and do the wrong entry or value in a given calculation which largely affected the final report which the company produced.
It is due to these many short comings and negatives impacts of the manual accounting systems which has led to the introduction and the adoption of computerized accounting systems in the companies. These systems helped increase the bulk of work involved with the accounting work of a given company. They increased the efficiency of the work done by the manual accounting hence produced more accurate and reliable results to the users who use the accounting information to make decisions which affect the direct operations of that given company. Although the digital, computerized and modern accounting systems have many advantages, they are also prone to some risks and disadvantages which could be dangerous to the company. Therefore this article gives a brief summary of the risks involved in the accounting systems of the company and the ways to mitigate them or reduce their impacts. Risk identification is done and the possible ways which the company could use to ensure that the risks do not affect the company so much in a way that could be dangerous to the company.
Risks and the ways to reduce them
1 Infection of the systems by computer viruses
The accounting systems of the given company are prone to the infection by computer virus which could affect the effectiveness of the systems. The computer malwares enter into the systems either intentionally by creation by the users or unintentionally from the internet. The viruses which affect the computers may lead to the corruption of the systems making the not to work as effective as they used to be. The viruses also may also lead to the loss of the data stored in the systems which may also lead to the loss of very important information to the company. In the worst cases these viruses and malwares may lead to the corruption and alteration of the whole systems which may call for the development other whole systems. The company should develop antivirus to check reduce the effects of the viruses on the systems of accounting. The systems should be well encrypted so as to make sure the systems are strong enough to resist and prevent the impacts brought about by the infection of viruses. The company should also sensitize the employees on the benefits of keeping the company’s systems safe. Warn the employees on careless downloading of unprotected materials which could be viruses or malwares to the systems of the company.
2 The risk of unauthorized control and access to the accounting systems
The accounting systems of the company face the risks of unauthorized access by other persons who are part of the users of the systems or who may be users of the systems but use them in a negative manner. The unauthorized access to these files and systems may lead to the deletion of data by the persons who access the systems illegally. They may also alter the entries of the accounting books of the company which can easily lead to the wrong reporting, wrong implication ad finally the wrong decision taken by the management of the company which leads to a great negative impact in the long run or near future. These persons may also change the passwords of the systems making the true users not to be able to access their rights to the system well as required by the company. The persons may also used the company’s accounting information in the wrong way in the sense that they may print the information and give out to the public or use it for criminal purposes. To ensure the company reduces the risks of unauthorized access, the accounting systems need to e update everyday and more protection done to the systems with the growing technology. Thorough check to the system by the administrators also need to done to ensure the systems are working effectively and also the sure to check whether the entries of the accounting files are true accurate before reporting to produce reliable and accurate results and may be the decisions to be made later by the management in developing the company’s worth
3 The effect of natural calamities and disasters which may affect the systems physically
Natural disasters are the unpredictable and uncertain future occurrences of nature which may not be under the control of humans i.e. are beyond the scope of human control and their effects cannot be quantified prior with accuracy and certainty. These occurrences and calamities include fire which may be started by individuals unintentionally or due to power systems failure which may not be caused by humans, floods which occur due to rains which is beyond human control, earthquakes are also involved in this category, storms and other natural disasters. The effects of these occurrences may not be to the systems directly but affect the hardware like the computers in which the systems are contained. For instance, fire which may lead to the burning down of the computers may lead to the loss of stored data in the computers discs or the any other hardware in which the data may be stored. The natural disasters whose impact may not be known prior to the occurrence, may lead to adverse effects or, the effect may be reduced. Damaging the hard ware may also lead to alteration of the systems also contain I the computers or discs. To reduce the impact of this risk of natural disasters, the company will need to have a complete back up of the systems elsewhere far from the premises where the operations of the company. These backup systems should be tested and deemed to be working hence, may provide a complete back up for the company in any case the original systems are affected by the natural disasters. To reduce the effects of fire, the company need to be having good fire control measures, installed fire extinguishers in all strategic parts of the company. These would help in reducing the effect of a fire in case it arises when people are at work. The company also needs to educate and sensitize its staff on the fire safety and control measures, and also being care in power handling to prevent causing any fire which might occur. These measures could help mitigate the risks brought by the natural disasters though there are a lot of uncertainties attached to them in terms of the timing of occurrence and the impact brought in case they occur and affect the company.
4 Lack of experience by new employees of the person appointed to be the administrator of the system
The lack of knowhow, knowledge and expertise by new entrants to the company on the use and administration of the systems poses a great risk to the company. This lack of expertise may be lead to the incorrect use of the systems by the new entering employees which can largely affect the end result of the accounting output and results. The administrators lack of expertise poses a great danger since he/she will not be able to protect the given system hence it will be easily corrupted by others malicious users outside the company. They are also not able to update the system as frequent as required risking the system to be outdated and very prone to the viruses which are developed new ones each day. The company should reduce the risk by continually training the new entering employees to the company on the use and protection of the systems from viruses. The company may also try to appoint the best competent and qualified personnel to be administrators of the system who have the ability to detect any malwares, unauthorized log in and be able to solve the issues with the necessary urgency. The company should also strive to keep their chief administrator of the system to avoid losing him which would lead to loopholes in the given accounting systems which store sensitive information to the company. The company should also continually take their employees to a series of trainings on the use of the given systems to equip them with the necessary skills. These would help reduce this risk and hence a better company performance, reliable results and later best decisions to the company. Having qualified and competent staff to the company helps the company develop confidence ensuring good and better productivity of the company. The company should also do proper recruitment of employees which should help them in getting the best qualified staff who will be able to cope with the performance requirements of that given company including the handling of the accounting systems. This should be done in all departments not necessarily the accounting department since the users of the accounting information are many and accounting information is used across all the employees of the company.
5 The accounting systems of the company are also prone ...