How To Prevent Fraud And Identify Accounting Errors Before They Become Problems


Many times it happens, we make accounting errors unintentionally, but not able to detect and rectify it. Detection and provision of accounting errors and mistakes are mandatory to maintain accounting standards and outstanding financial performance. While starting to detect accounting errors, you will find that not all mistakes impact trial balance directly. For this purpose, the accounting team in the organization needs to learn and understand all detection methods and standards in order to recognize errors and rectify them.Understanding of internal control procedure and its implementation help to check accuracy and transparency in accounting and financial reporting.

Internal control procedures in accounting and auditing can be considered as a process of detecting errors, informing financial decisions and preparing financial statements. It helps managers and auditors to maintain accurate accounting records by preventing fraudulent activities before they become a headache for the organization. Detection of accounting errors refers to the identification of errors that occurred due to omission, reversal accounting entries, forgetting accounting principles and wrong subsidiary entries.

Before explaining the importance and implementation procedures of internal control, it is important to understand different types of accounting errors.


An accounting error of omission occurs when anyone forgets to transact any entry completely, in other words, when a transaction is not included in or omitted from the accounting records of the company, these kinds of errors become difficult to detect. Therefore, accounting professionals need to make sure to detect and correct errors in a daily basis.

These kinds of errors generally occur by forgetting to do entries of regular business transactions. For example, you may not remember to transact expenses and entering the sales transaction of products or services.


Reversal errors generally occur when the details and accounting transactions should be entered in the debit side but posted as credit or vice versa. For example, you may enter an invoice of payment received as payment paid, in this situation, the payment transaction that should be transacted credit side, posted as a debit entry.


When anyone forgets applying the right principle and do wrong accounting entries, it is known as an error that occurred due to Principle error. For example, if you purchase furniture for official use then the bookkeeper needs to make debit entry to furniture and credit to cash. If you confuse with the actual transaction principle and make a wrong entry like debit the purchase account and credit to cash. So this is a principle error.


An error related to commission generally occurs when transactions made in the right class but wrongly posted in the wrong ledger. For example, if anyone commits this mistake, he will apply the payment to the wrong ledger invoice. So, the trial balance will rectify it as correct but due to committing entries in the wrong ledger, your individual customer’s ledger will show the wrong balance.

How To Detect And Prevent Accounting Errors?

Detection of accounting errors can be done with the development of internal control procedures. Proper implementation of IC processes are mandatory to rectify errors, it can help by preventing frauds and avoid financial loss. If you are looking forward to identifying errors, auditors, accounting professionals, and bookkeepers need to understand the importance of the IC process.

Above mentioned errors generally occur from time to time, nobody can prevent all accounting mistakes from occurring, but it can be controlled by applying the right accounting standards and following it properly. Accounting reconciliation should be perfect which should be continued from time-to-time to check accounting accuracy, transparency and efficiency of financial recording. You will find effective ways if you follow the tips on how to implement internal control procedures for routine performance evaluation and accounting reconciliation review.

Tips to prevent Accounting Errors via Internal Control Procedures

Duty Separation

Separation of duties is important, it includes splitting or shuffling the responsibilities for auditing, bookkeeping, reporting and making financial statements. Once the duties get classified, people will hardly get any chance to commit accounting mistakes intentionally-unintentionally.

Accounting Transactions Access Controls

Implementing accounting control procedures is important which can be happened by avoiding manual traditional transactions and starting using accounting software for system accounting entries. But, it is also important to give proper training to users, keeping systems save via codes and secured passwords. Electronics access control and the log will keep an unauthorized person away from the system and it will increase the audit possibilities to reduce the error completely.

Physical Security And Audit of Assets

Physical audits is another element included in IC implementation. It includes the IC process related to manual counting cash and making entries in inventories, material, and tools. A physical audit will help accounting professionals to disclose and identify hidden discrepancies related to accounting transactions by doing manual auditing and system entries all-together.

Proper Accounting Documentation

Standardizing the document is very important and when it comes to rectifying accounting errors and financial transactions, it becomes mandatory. Documentation of invoices, cash vouchers, sales bill description, etc can be handled effectively once in the week, other transactions that are usually done many times a day such as internal material requests, inventory process management, etc, can help you to maintain consistency in keeping accounting records.

Periodic reconciliation of Accounting Records

A periodic review of accounting records is necessary to give surety to the accounts department about accounting balances, entries, aggregate, etc done in the accounting system. Occasional accounting system evaluation helps to follow accounting standards while making entries and checking balances of accounts.

What to Expect in the End

Fraud and error prevention is very essential for any business. If a business has been implementing any fraud prevention process and including experts then it will help in the implication of accurate financial and legal policies. Taking help from the internal control process advisor will assist you to understand what is right for your business.

For effective assistance, you are recommended to consult with the internal audit advisor today.

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