Application controls refer to the transactions and data relating to each computer- based application system and are specific to each application. ‘Tone at the top’ is a term that originated from the field of accounting and it is used to describe an organization’s general ethical climate, as established by its board of directors, audit committee and senior management. A reliable financial report allows interested parties to evaluate and manage the company in an accurate and relevant way.
When referring to ‘tone at the top’, business ethics experts believe having a strong ‘tone at the top’ helps prevent fraud and other unethical practices in a company. The main objectives of application controls are to ensure the completeness and accuracy of the records and the validity of the entries made therein. In application controls, there are typically three key system stages of input, processing and output.
The input controls are generally supposed to assure validity and accuracy because regardless of whether it is accounted to manually r by computer, it is safe to say that the data in the system are usually controlled and authorized by a small number of individuals. This goes to show that there is restricted access for input control. Besides that, for processing control, it possesses the completeness trait as it aims to ensure data within the system is correctly and accurately processed.
In addition, a business has to be selective with providing its information through the output control to prevent any confidentiality issues that could affect it. Despite the fact that strong application controls would provide accuracy, completeness and validity of data, it will not be presented in the most accountable way without a ‘tone at the top’. Therefore, it is relevant that a business still requires a strong ‘tone at the top’. Even with strong application controls, it is possible for employees to make mistakes or take advantage of the lack of leadership in a company. It gives room for error and issues like fraud can occur.
A strong ‘tone at the top’ gives an impression of respect from the employees to the employers. This helps guarantee the accuracy, validity and completeness of the financial reporting. In conclusion, it is better to have a ‘tone at the top’ in a business to ensure an ongoing successful business. This is explained by the assurance of a disciplined group of staffs that are in charge of the accounting quality of a business. Without an obvious individual or group standing up and taking the role of the ‘tone at the top’ of a company, it would lead to a formation of a fragile and weak business.