It's "correct" by the book. In real life, however, less and less native speakers have been using the word to mean "funny". Most would use おもしろい or even the originally-Kansai version オモロい. I hear many non-old Tokyoites use オモロい nowadays.
However, when we want to emphasize the subtle comicalness of a joke rather than the more obvious (and superficial) funniness, おかしい is still a good word to use.