Method for analyzing effectiveness of internal controls in a model of an accounting system

A method, operating on a computer having an input means, a memory means, a calculating means and a display device, for quantitatively evaluating internal controls in a model of an accounting system having computerized accounting operations, said method comprising the steps of:

• a) inputting said model by said input means so that at least a portion of said model is stored in said memory means;
• b) determining possible accounting failures in processing of transactions in said accounting system which can have an impact on validity of accounts and standing data collections by said calculating means;
• c) determining for each internal control in said accounting system, a first subset of said possible accounting failures which each internal control is capable of detecting by said calculating means;
• d) determining for each internal control, a second subset of said possible accounting failures which may inhibit each internal control by said calculating means;
• e) ascertaining from at least said first subset and said second subset, for each said possible failure, failure impact risk measures, each said failure impact risk measure being a quantitative assessment of the likelihood that each said possible accounting failure, if said possible accounting failure were to occur, would have an impact on the validity of a corresponding account collection and not be detected by an internal control in said computerized accounting system by said calculating means;
• and
• f) outputting whether said failure risk measures exceed preselected thresholds for acceptability on said display means.