ISA 400 Risk Assessment and Internal Control accounting system is the series of tasks and records of an entity by which transactions are processed as a means of maintaining financial records. Such systems identify, assemble, analyze, calculate, classify, record, summarize and report transactions and other events.

ISA 400 Risk Assessments and Internal Controls states that the auditor should obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. The auditor should use professional judgment to assess audit risk and to design audit procedures to ensure it is reduced to an acceptably low level.

The Companies Act Cap 486 places a duty upon the auditor in preparing his report to carry
out investigations that will enable him form an opinion on the financial statements in accordance
with the seventh schedule to the Companies Act Cap 486

The objective of the accounting system is to ensure that all transactions are completely and accurately processed and recorded and that the resulting accounting entries are valid.

Managements interest in the accounting system

Management needs complete and accurate books of accounts because:

i. There is no other way the business can be controlled;
ii. Records of debtors and creditors are indispensable;
iii. The best way to safeguard assets is to have a proper record of them;
iv. Accounts can only be prepared if proper primary books exist;
v. The Companies Act has specific requirements on keeping of proper books of accounts;
vi. The various acts covering NSSF, NHIF, PAYE, VAT, LEVY require proper books.

What constitutes an adequate system of accounting depends on the circumstances. The important thing is that the system should provide for the orderly assembly of accounting information to enable accounts to be prepared. A system of accounting cannot succeed in completely and accurately processing and recording all transactions, unless internal arrangements set up by the management known as Internal Controls are built into the system.