The next move: Internal Control Standards

We are talking about accounting reports standards, the GAAP, SME-FRS etc. All these may not be the remedy at all if there is no internal control. "Executives say poor internal controls contribute most to fraud" is a proof that we should know.

Some may realize that big corporations should be better. But, remember the biggest frauds are related to big corporations. If a corporation has internal control on paper, it is just window dressing only.

Due to my project, I always have the same questions to explain. Why my accounting module does not have invoicing function? Yes, there are lots of accounting programs with invoicing functions. The reason is simple. I understand internal control and the accountants should not handle invoicing. That is the basic management unless it is a one-man company. Some may say that SMEs cannot afford to have two employees to handle accounts and invoicing. I shall not complain anything because these SMEs will not have the insight to manager, not to say developing at all.

When topic like management is mentioned, HK people always supposed that the SMEs in mainland China would be lack of any system. But there is a rule in mainland China that cashier and accountant must be handled by different employee. Why? Money and accounts with the same employee is the top cause of fraud.

I can neglect this problem and follow the others. It is a simple task as I have been working with custom programming for years. But I cannot accept that my products would lead to frauds. Same as before, I have to be responsible to the clients as a company. If I do not care about this, I should be rich years ago. The only drawback for me is the 'know'. Ignorant may be the better way for business. Get the money and do not care whether the product will lead to damage fro others.

Of course, I shall work on the Invoicing as a separate module. Simple invoicing program or traditional stock control is not suitable for today. That is why I need further investigation to come up with a better design for invoicing etc.

It has been mentioned already internal control will be another part of understanding the healthiness of a corporation. I believe that this will be other standards for SMEs.

Something right and something wrong

Reading "PCAOB fines Deloitte $1 million", I think that this is a right decision. At least someone has to be punished for not performing the duty. Not only we need such organization everywhere, these reports should be widely published. In fact, governments must support this type of accusations.

Reading "Accounting Errors Cause Plunge in VeriFone Share", I feel that there is something wrong in our time. When the result was manipulated to meet or even better than expectation, the shares surged, lots of people gained and happy. When the manipulation was discovered and the result adjusted, the shares plunged, lots of people lost and unhappy. So it seems that the discovery was the bad one because of loss. By accounting, the gain is balanced by the loss and the value might remain unchanged. The only problem is someone gained and someone loss. In fact, that is the way of stock market. If one is the unlucky one, he/she will blame the timing of discovery, not until he/she sold the stocks. That means if there was no error, it is not attractive any more. Of course, the endless estimation of profit to push up the market is the tool today. This would force some CEOs to risk their career because there is no way out if performance was below the market's estimation. It is interest to know how many CEOs get away without discovered. May be we can never know. The GAAP, FRS etc. should be a good thing, otherwise bad practice will never go away.

Everything is accounted for Accounting

Perhaps it is the problem with English. Whenever any counting is accounted for, it is already the accounting's problem. Accounting is done by accountant, right? Therefore accountants are responsible for every bad thing. Good things are most likely be enjoyed by CEO, Chairman or boss.

To count the votes of a beauty Pageant does not need an accountant. A grandma or a Japanese chimp would be fine. When counting is wrong, see "Accounting error changes results of beauty pageant", it is the accountant who has counting error. Why not ask an accountant to count the sperms when we make love? Why not ask an accountant to count the lies our leaders had said?
It is ridiculous for an accountant to involve with such entertainment event. May be the paid is high, I do not know. But one thing is certain, we never have an accountant to count the presidential election. Does this mean accountant is not capable to do serious cases?

If an accountant fails to count votes, who will trust such accountant? That is why Financial Reports are hard to trust because accountants cannot count simple things properly.

Shame! Shame! Shame!