Huffman Trucking
August 24, 2009

Huffman trucking
Introduction
The trial balance can be prepared at any point in time which lists all ledger account and the balances are used to provide the equality of debits and credits. Assets are listed first followed by liabilities and then owner’s equity. The trial balance proves that the accounts balance, but does not ensure that all transactions were entered or entered in the proper accounts. At Huffman Trucking we have decided to integrate an automated accounting information system (AIS) using internal controls to ensure the correct data and information reach the right departments in a timely manner. We will explore the importunateness of the AIS internal control and how they are different from a non-automated system.
Integration of the automated AIS When it comes to the trial balance, companies can find at the end of the accounting cycle the trial balance has many errors. We would like to introduce the trial balance that is completely automated and could alert the company if any errors were to occur at any given time. We should have a system set up to remind the accounting department to check the trial balance for errors on a weekly basis. As stated by Netmba.com (2007), “The more often the trial balance is calculated during the accounting cycle, the easier it is to isolate any errors; more frequent trial balance calculation narrow the time frame in which the error might have occurred, resulting in few transactions through which to search,” (¶ 6). This allows time to check for any missed transactions as well. The accountant in charge could take a look at transactions for the week and then could make any necessary entries, ones that were left out or to correct the erroneous ones. To do this we must first set up perimeters to remind the accountant to check the preliminary trial balance. It could be a simple calendar reminder that shows up on the due date needed to run the preliminary trial balance. If the accounting program does not have a calendar option available, then the accountant can set up this reminder in a calendar program located in the email we use. Once the calendar alert appears on screen, the accountant can then run the preliminary trial balance. The accounting program should alert the accountant of any errors in the trial balance when running the report. If there are any alerts that general ledger accounts are not in balance, there should be a report showing what accounts are not in balance. This will help reduce the time needed to search through the trial balance. The accountant can then review the general ledger accounts and make the necessary entries to correct the unbalanced accounts. At this time, he/she can then enter any transactions that may have not been included during the week, as long as there is knowledge of missed entries. The accountant can also review of any of the debits or credits were transposed. Human error does account many times for the trial balance of being off. Once all adjusting entries are entered, the accountant can rerun the trial balance and should find everything is in order. With the calendar reminder to check the trial balance and the ability of the system to alert the accountant of any errors, this should help reduce the time and energy needed to research and analyze the accounts. In fact, checking the trial balance weekly should make the end of the month reports run smoothly and more efficiently. Once it is time to begin the year end process, the accounting department should feel confident that the general ledger is in balance and error free.

Establishing Internal Controls Effective internal controls within preparation of the trial balance insure that recorded transactions are accurate and all transactions have been accounted for. Internal controls that can be established are limiting access to those that can change certain accounts, separate and rotate duties, and test and review the trial balance weekly for any new changes. Sometimes, the trial balance is not balanced correctly at the end of a cycle. The important part is for the trial balance to match the amounts in the general ledger. If the amounts in each account are identical, checking the trial balance should not be an issue. Management must enforce the internal controls and should assign each account a preparer, a reviewer and an approver. One person should not have access to do all three duties because it creates too much room for error. If the proper precaution is taken, this creates an internal control within each account so that the accounts are reviewed by three different people. Segregation of duties is an important factor when dealing with a large amount of accounts. If there is an error noticed during preparation, the appropriate manager should take note of it and fix the error before the trial balance is posted. Taking this approach can help minimize errors in the trial balance and lessen any associated risks.
Importance of Controls The importance of these controls is to eliminate the errors that may be seen on a trial balance. Limiting access to only a few people in the office creates fewer errors. The reason being is that when there are too many people trying to do one thing this can cause system errors, in a result in errors in numbers. This would make the trial balance not balance. Limiting access to three people at a time and rotating these duties on a weekly basis ensures that the trial balance is accurate for the company. These controls would be different from a non-automated system in that they would have to know the in and outs of accounting. The controls would have to know exactly what is expected in a trial balance, and knowing which side is the correct balance for credits and debits. With an automated system the company is able to have the system programmed to automatically move certain accounts into the trial balance in the correct balance side. The controls would just need to enter the amounts. Non-automated system would require more work. This would make it difficult for one person to do alone in a timely manner. Also notations on the trial balance would be crucial so others in the company would be able to understand the math in the non-automated system.
How the new AIS will provide information With the new AIS system in place it will also make it easier to provide the right information to the right people in a timely manner. Following all the controls and checks stated above, reporting should be the easy part. Since all the information is going to be stored correctly, we can set up reports that can appear instantly with a click of the button. They would be updated daily, weekly or monthly by using the information that is already saved. There can also be reports sorted by management, with this we won’t have the wrong people looking at the reports. Ensuring that this process is done daily at the same time will ensure that the reports are available when needed and the segregation of management will ensure that the appropriate people get the reports according to their level of employment. A simple sample of a data flow diagram of how the AIS would work is below. This is how implementing this routine daily should give us an outcome of having reporting and data available correctly at any given time.
[pic]
Figure 1 – Data Flow Diagram of the AIS

Conclusion When a period of time passes by and the trial balance has not been prepared there are higher risks of error which can cause a business to eat up a lot of their resources. The integration of the automate trail balance system will save Huffman Trucking time and reduce costs with automated weekly trail balance sheets while alerting the accountant when the debits and credits are not balanced. Once establish proper training will be provided to those who are allowed authorized access to the system along with the separation which will be rotated periodically to reduce errors and risks of fraudulent activities. In having a non-automated system Huffman runs a higher risk in human error and wasted time that could have been spent on other business activities. The AIS will reduce processing time while delivering the trail balance to management in a timely manner to make more efficient and effective business decision.

References
NetMBA.com (2007). Trial balance. Retrieved August 22, 2009, from http://www.netmba.com/accounting/fin/process/trial/

-----------------------
Reporting to lower management

Reporting to upper Management

Manager Approves

Supervisor Reviews

TB Balanced

Computer Program

Alert – TB off Balance

Clerk

Accounting Dept

-----------------------
Huffman

8