Page 159 - Accounting Information Systems

130 PART I Overview of Accounting Information Systems

FI GU RE
3-3 PREVENTIVE,DETECTIVE, AND CORRECTIVE CONTROLS

Undesirable Events

Preventive Preventive Preventive Preventive

Levels Detective Detective Detective
of
Control

Corrective Corrective Corrective

The Preventive–Detective–Corrective Internal Control Model
Figure 3-3 illustrates that the internal control shield is composed of three levels of control: preventive
controls, detective controls, and corrective controls. This is the preventive–detective–corrective (PDC)
control model.

PREVENTIVE CONTROLS. Prevention is the first line of defense in the control structure. Preventive
controls are passive techniques designed to reduce the frequency of occurrence of undesirable events.
Preventive controls force compliance with prescribed or desired actions and thus screen out aberrant
events. When designing internal control systems, an ounce of prevention is most certainly worth a pound
of cure. Preventing errors and fraud is far more cost-effective than detecting and correcting problems after
they occur. The vast majority of undesirable events can be blocked at this first level. For example, a well-
designed source document is an example of a preventive control. The logical layout of the document into
zones that contain specific data, such as customer name, address, items sold, and quantity, forces the clerk
to enter the necessary data. The source documents can therefore prevent necessary data from being omit-
ted. However, not all problems can be anticipated and prevented. Some will elude the most comprehen-
sive network of preventive controls.

DETECTIVE CONTROLS. Detective controls form the second line of defense. These are devices,
techniques, and procedures designed to identify and expose undesirable events that elude preventive
controls. Detective controls reveal specific types of errors by comparing actual occurrences to pre-established
standards. When the detective control identifies a departure from standard, it sounds an alarm to attract