Accounting Information Systems

Transcription

1 Accounting Information Systems Fourteenth Edition Chapter 16 General Ledger and Reporting System ALW AYS LEARNING

2 Learning Objectives Describe the activities, information needs, and key decisions made in the general ledger and reporting system, explain the general threats in the cycle, and describe the controls that can be used to mitigate those threats. Explain the process for updating the general ledger, the threats to that process, and the controls that can be used to mitigate those threats. Explain the purpose and nature of posting adjusting entries, the threats to that process, and the controls that can be used to mitigate those threats. Explain the process of preparing financial statements, the threats to that process, the controls that can be used to mitigate those threats, and how IT developments such as XBRL can improve the efficiency and effectiveness of preparing financial statements. Describe the process for producing various managerial reports, the threats to that process, and how tools like responsibility accounting, the balanced scorecard, and well-designed graphs can help mitigate those threats.

3 General Ledger and Reporting System Process Update general ledger Post adjusting entries Prepare financial statements Produce managerial reports

4 General Threats Throughout the General Ledger and Reporting Cycle Threats 1. Inaccurate or invalid general ledger data 2. Unauthorized disclosure of financial statement 3. Loss or destruction of data Controls 1 a. Data processing integrity controls b. Restriction of access to G/L c. Review of all changes to G/L data 2 a. Access controls b. Encryption 3 a. Backup and disaster recovery procedures

5 Update General Ledger Threats 1. Inaccurate updating of general ledger 2. Unauthorized journal entries Controls 1 a. Data entry processing integrity controls b. Reconciliations and control reports c. Audit trail creation and review 2 a. Access controls b. Reconciliations and control reports c. Audit trail creation and review

6 Adjusting Entries Accruals Made at end of accounting period to reflect events that have occurred but are not in the financial statements (e.g., wages payable) Deferrals Made at end of accounting period to reflect exchange of cash prior to performance of related event (e.g., rent) Estimates Portion of expenses expected to occur over a number of accounting periods (e.g., depreciation) Revaluations Entries made to reflect differences between actual and recorded value of an asset or change in accounting principle Corrections Entries made to counteract effects of errors found in the general ledger

7 Post Adjusting Entries Threats 1. Inaccurate adjusting entries 2. Unauthorized adjusting entries Controls 1 a. Data entry processing integrity controls b. Spreadsheet error protection controls c. Standard adjusting entries d. Reconciliations and control reports e. Audit trail creation and review 2 a. Access controls b. Reconciliations and control reports c. Audit trail creation and review

8 Prepare Financial Statements Produce Managerial Reports Threats 1. Inaccurate financial statements 2. Fraudulent financial reporting 3. Poorly designed reports and graphs Controls 1 a. Processing integrity controls b. Use of packaged software c. Training and experience in applying IFRS and XBRL d. Audits 2 a. Audits 3 a. Responsibility accounting b. Balanced scorecard c. Training on proper graph design

9 Regulatory & Technological Developments that Affect Financial Reporting International Financial Reporting Standards (IFRS) Understand the systems implications due to the fact that the IFRS is different in financial reporting than Generally Accepted Accounting Principles (GAAP) extensible Business Reporting Language (XBRL) Specifically used for communicating financial data (required by the Securities and Exchange Commission (SEC) if public company)

10 Managerial Reports & Evaluating Performance Responsibility accounting Reporting results based upon managerial responsibilities in an organization Flexible budget Budget formula based upon level of activity (e.g., production levels) Balanced scorecard Measures financial and nonfinancial performance using four dimensional goals: Financial Customer Internal Operations Innovation and Learning Graphs Data visualization and proper graph design

11 Key Terms Journal voucher file Trial balance Audit trail XBRL Instance document Element Taxonomy Schema Linkbases Style sheet Extension taxonomy Responsibility accounting Flexible budget Balanced scorecard