Internal Control in Automated Data Processing
by MASON E. NOLAN Principal, Portland Office
Presented before a joint meeting of the Portland Chapters of the National Machine Accountants Association and The Institute of Internal Auditors—December 1961
AT ONE TIME or another you have all read about someone opening his
mail and finding a check for some gigantic, absurd amount. You may also recall reading a year or two ago about an executive of a large company who misused his expert knowledge of the company's punched-card procedures to misappropriate a quarter of a million dollars. Our newspapers have given wide publicity to a number of instances such as these where internal control over automated data processing failed to prevent substantial errors or defalcations.
In view of this publicity it is not surprising that some members of management have occasionally felt uneasy about extensive mechanization
of their company's data-processing activities. Their apprehension
may be likened to that of the passengers on the first electronically
controlled jet flight from Los Angeles to New York. Shortly after the seat-belt sign went off and the plane settled on its eastbound course a pleasant voice came over the speaker system: "Welcome to Flight 713! You have the pleasure of being the first to fly on a completely
automated jet aircraft. There are no pilots aboard because all functions are under the unfailing control of an electronic computer. There is absolutely nothing to worry about... nothing to worry about... nothing to worry about...."
I do not mean to imply that the use of a computer to fly a passenger
plane is analogous with the use of a computer to process business data. The jobs are quite different, as are the risks. I trust that all of you have sufficient familiarity with mechanical and electronic
data processing not to be panicked by the possibility of equipment
malfunctions. You are not completely dependent on flawless functioning of gears, relays, tubes, and type bars; you rely on internal control to keep you out of trouble if the equipment fails.
Reliance on a good system of internal control to prevent errors
RISKS OF AUTOMATION