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Discussant's Response to A Taxonomization of Internal Controls and Errors for Audit Research John K. Wulff Main Hurdman & Cranstoun The objective of Dr. Vasarhelyi's project, namely "... to formalize and summarize the key issues in the relationships between individual internal control procedures, clusters of internal controls, internal control systems and the diverse types of errors which may occur.'' is admirable. The sheer number of controls and combinations thereof coupled with the multiplicity of possible errors renders the project particularly challenging. However, the project offers the potential to significantly enhance our understanding of internal controls and thereby to improve existing techniques used to evaluate the effectiveness of internal control systems. I tend to agree with Dr. Vasarhelyi that a crucial first step in the project is the development of a succinct taxonomy of internal controls and errors. Indeed, the subject of internal control, because of its complexity is difficult to analyze or discuss without first grouping controls and errors with similar attributes. The development of taxonomies, of course, is not an end in itself but rather a means to assist the author in portraying internal control situations analytically— thereby clarifying the relationship between controls and errors. Because the overall project is only in its initial stages, it is impossible to evaluate the effectiveness of the suggested taxonomies in enabling Dr. Vasarhelyi to achieve his ultimate objectives. The paper, moreover, fails to demonstrate why the particular taxonomies suggested by the author are likely to be more useful than alternative classifications. Under these circumstances, it is difficult and probably premature to either praise or criticize the author's groupings. Nevertheless, I will make a few brief observations. Classification of Controls—Exclusion of Management Controls Dr. Vasarhelyi distinguishes between internal accounting controls and "exclusively management oriented controls'' with the stated intention of excluding the latter from his study. It is not clear whether the phrase "exclusively management oriented" refers to the characteristic of the control or its purpose. A budgetary system, for example, is traditionally characterized as an administrative or management control. Nevertheless, effective budgeting (including variance analysis) may highlight unauthorized disbursements and otherwise improve management's ability to meet internal accounting control objectives. I believe that distinctions between management controls, on the one hand, and internal accounting controls, on the other hand, are, in many instances virtually impossible 59
Discussant's response to taxonomization of internal controls and errors for audit research
Wulff, John K.
Nichols, Donald R., ed.
Stettler, Howard, ed.
Auditing -- Research
Auditing Symposium V: Proceedings of the 1980 Touche Ross/University of Kansas Symposium on Auditing Problems, pp. 059-060
|Source||Published by: University of Kansas, School of Business|
|Rights||Contents have not been copyrighted|
|Format||PDF page image with corrected OCR scanned at 400 dpi|
|Collection||Deloitte Digital Collection|
|Digital Publisher||University of Mississippi Library. Accounting Collection|