Chapter 7, Problem 1QC

Which of the following benefits of an effective accounting information system provides safeguards for a business’s assets and reduces the likelihood of fraud and errors?

Learning Objective 1

a Flexibility
b. Relevance
c. Control
d. Compatibility

To determine

An Accounting Information System (AIS) is a process which collects data, processes the same into information, and distributes it to users. It is a tool which helps smoother decision making. The purpose of an accounting information system (AIS) is to collect, store, and process financial and accounting data and produce informational reports.

To determine:

Which benefit of the effective accounting information system provides safeguards for business assets and reduces the likelihood of fraud and errors?

Answer to Problem 1QC

Solution:

C. Control

Explanation of Solution

Explanations:

Given: Following choices are given:

a. Flexibility

b. Relevance

c. Control

d. Compatibility

Control assures that internal processes and procedures are implemented according to the standards set by the management. It Creates structure and encourages adherence to management procedures. Detects errors and frauds and also reduces chances of frauds and errors which may occur in future.

Objectives of Control: To safeguard the assets of the organization, to maintain records, to provide accurate & reliable information whenever required, to promote & improve operational efficiency, to encourage adherence to prescribed policies, to comply with applicable laws & regulations and to detect errors and frauds.

Other benefits of accounting information system serve for following:

Flexibility: Facilitates the business to accommodate with the changes madein the business over time or contingencies which may occur in future.

Relevance: It refers to the relation of the information with the subject matter. It saves time by reducing irrelevant information.

Compatibility: It facilitates compatibility between employees and structure of the organization.

Conclusion

Thus, among all the given benefits of the effective accounting information system, CONTROL provides safeguards for business assets and reduces the likelihood of fraud and errors.