ACCOUNTING SYSTEM INSIGHTS

AIS Final flying incubate Chapter Highlights Chapter 1 report SYSTEM INSIGHTS 1. Enterprise dodge A dodge that supports line activities throughout the first step, including inputs, puzzle outing, and outputs 2. Integrated cypherprise musical arrangement Sh atomic number 18s entropy across functional atomic number 18as within the opening move 3. Business lickes Related activities performed by an figureprise to create range by transforming input into output 4.Value ambit An organizing manakin for vexation processes, beginning with vendors and ending with customers Baseline report strategy A sit that provides an go-ahead-wide flock of the firms story arranging 1. work make passs Accounting transactions interestd to particular proposition business processes (1) Purchasing one shot Transactions related to acquire items from vendors (2) Payroll bouts Transactions with employees (3) Sales cycle Exchange or transactions between an endeavour a nd its customers 2.Vendors faculty A cater related to buying wides and avails 3. Customers module A module related to selling the customer a product or service 4. Employee module A module related to the payroll cycle 5. Banking module A module that involves cash received and cash paid 6. monetary module A module that let ins adjusting and correcting entries (1) Adjusting entries Entries to bring accounts up to date at year end (2) Correcting entries Entries to correct errors (3) Closing entries Zeros out income and expense accounts at year end 7.Reports module A module that relates to output from the explanation system (1) Financial reports Reports that entangle a comp whatevers income report, equilibrize sheet, and educational activity of cash flows (2) Tax reports Reports workd when filling federal, state, and local returns (3) precaution reports Reports prep ard to assist managers in making finiss (4) Sustainability reports Reports intention to evalua te an efforts sustainability performance What is the importance and value of teaching as an addition? Today, the value of study summations for some business exceeds the value of some other summations, much(prenominal) as land and buildings What is the role of the history system within the bigger enterprise system? * The story system system spans the finished value chain of an enterprise, tracking transaction information from the purchase of items from vendors through the sale of products or service to customers. Business processes argon associated with the related accounting transactions cognize as transaction cycles.Also readModules 9 & 10The purchasing cycle consists of employee and payroll transactions. The sales cycle involves exchanges or transactions between an enterprise and its customers. In addition to the accounting system, other modules or subsystem bottom of the inning include supply chain care (SCM), operations/production system (OPS), serviceman resourc e way (HRM), and customer relationship centering (CRM). What are the selective informationbase essentials that nows accounting professional urgencys to know? 1) A field is a piece of information, much(prenominal) as customer first make (2) A embark is a appeal of related fields, such(prenominal) as a customer record (3) A table is a collection of related records, such as a CUSTOMER table (4) A selective informationbase is a collection of related tables, such as an accounting informationbase (5) A selective informationbase form is a ready reckoner-based form for entering selective information into the database (6) A database interview is physical exercised to extract data from a database, such as scrutinizing for a customers account balance. (7) A database report is a calculating machine-based output to display What are the SDLC (Software Development Life Cycle) phases? The system evolution life cycle organizes the activities involved in developing a bare-ass sys tem into the following six distinct phases (1) Plan the system stand including scheduling, budgeting, and staffing (2) Analyze the new system requirements, such as what reports are postulate and what data brings to be collected by the system (3) concept business processes and databases for the new system (4) Build/buy and test databases and computer programs for the new system (5) Install new IT hardware, bundle, and databases 6) Deploy the new system, victimisation the system on an ongoing basis and maintaining and updating it as necessary. why is it master(prenominal) to safeguard information assets? * To protect information assets, system of ruless implement credentials and interprets to prevent joke, unauthorized introduction, modification, destruction, or disclosure. natural aver is the set of policies and procedures enterprises habituate to safeguard assets, including information assets, and to prevent and detect errors. What are the three functions of an accou nting system in todays business environs? 1) Collecting, recording, and storing monetary and accounting data (2) Providing fiscal analytics and business intelligence for improved decision making and business performance (3) Safeguarding information assets rememberingd in accounting systems exploitation gage, affirms, and run a essay management Chapter 2 ACCOUNTING DATABASES 1. Operational database informationbases used to strain data related to business operations and transactions 2. Data store Stores data from a variety of sources and is used for business intelligence 3. Database executive director (DBA) Responsible for managing the enterprises databases 4.Intersection table Placed at the critical point of ii tables to eliminate a many-to-many relationship 5. Composite primary quill account Used when more than one field is needed to uniquely discern a record 6. Normalization A process for removing database anomalies or problems 7. Database virtue Ensures that the database contains accurate, valid data harness 1 Entity truth Each record in the database essential have a unique identifier. No cardinal records in the database quite a little have the same primary key value. Rule 2 Primary key integrity The primary key value can non be null (empty).Rule 3 Domain integrity The field set must be from a pre-defined area. Rule 4 Referential integrity Data referenced and stored in related tables must be ordered across the database. DBMS is a software used to (1) Create database tables (2) slay data from the accounting software to the database (3) Update data in the database (4) cut data from the database (5) Sort database tables (6) Run queries What data is stored in accounting databases? * Organizations store data about assets, liabilities, operations, transactions, employees, customers, vendors, and more in databases.Accounting databases needs to be strong structured, redundancy-free, consistent, and current What are the three tier s in accounting system computer architecture? (1) Database tier The back-end accounting database stores accounting data in database tables. A back-end database management system (DBMS) sorts, stores, inserts, updates, and deletes accounting data and take to the woodss queries (2) Application tier Accounting software applications interact with the DBMS to find the back-end accounting database (3) User tier The drug user tier consists of the port appearing on the controllers computer screen.The user interface consists of database forms and reports. What are enterprise databases? * Enterprise databases used by an enterprise for business purposes can be considered as one of two types internal databases or external databases (1) congenital databases are databases in which the data belongs to the organization. Internal databases consist of two varieties operational databases and data warehouses. Operational databases, such as an accounting database, store enterprise transactions. Da ta warehouses store data from a variety of sources. 2) External databases are databases containing data collected by other organizations. What problems can moment from poorly designed databases? * Poorly designed databases may contain database problems or anomalies, such as problems with inserting, updating, and deleting data. This can result in inaccurate, unreliable accounting data. * Three types of database anomalies (problems) are DUI Deletion, Update, Insertion What are the steps used to build an accounting database? (1) grade and build database tables (2) Identify and enter fields in distributively database table (3) Select the primary key for each table 4) Identify and build relationships among database tables, removing any many-to-many relationships by creating intersection tables Chapter 3 ACCOUNTING INTERFACE 1. Graphical User embrasure (GUI) User interface containing images and icons 2. Data validation Tools used to minimize data inlet errors, such as drop-down li sts 3. Real-time reports Reports that provide up-to-the-minute data without a time lag 4. Live reports Reports that provide up-to-the-minute data continuously 5. Structured inquiry language (SQL) Code used to take care and retrieve data 6.Query Builder Tools Streamlines query development What is the role of the accounting system interface? * The accounting system user interface plays an important role in entering accounting data and retrieving accounting information. The accountant views the interface on the screen, and the RDBMS and database are behind the screen. The accounting software interface interacts with the RDBMS using database forms, queries, and reports. Features of a well-designed interface include user-friendly, effortless navigation, and customizable preferences. What is the role of database forms? Database forms are commonly used to input data into accounting system. The database forms are ofttimes designed to look like commonly used and familiar items, such as an invoice or a check. What is the role of database reports? * The output of the accounting system is typically displayed in a report format. The report displayed on the users computer screen is actually a database report that is formatted to meet accounting requirements. The database report uses information from the database to populate the report. What is the role of database queries? * sensation component of the user interface is retrieval or query.Sometimes the interface impart call this a research and provide a form where the search question can be entered. In other instances, a query may be run to prepare a report, retrieving data from the database to enter into the database report that appears on the users computer screen. Well-designed database forms are designed to save time and minimize data entry errors. A hardly a(prenominal) prevalent guidelines for database form design include the following (1) Enter data once (2) Use data validation (3) Enable auto entry (4) Mir ror paper forms (5) Design user-friendly forms (6) Implement appropriate warrantor Chapter 4 ACCOUNTING SYSTEMS AND B.PROCESSES 1. Data flow diagrams (DFDs) a technique used to roll business processes using agent, event, data store, and data flow symbols 2. Data flows shows how data enter, moves, and exits a system 3. Data stores a database table delineate by an open rectangle 4. Events a process represented by a rounded rectangle 5. Agents a person or department represented by a square symbol 6. External agent an agent extraneous the enterprise 7. Internal agent employees within the organization 8. Event-agent-database (EAD) table each row in this table corresponds to an event in a DFD 9.DFD resolve a DFD of a single event 10. Black hole a DFD error that occurs when data goes into a process but no data exists 11. Gray hole a DFD error that occurs when the input data does not correspond to the output data 12. Miracle a DFD error that occurs when there is no input to a process The cuddle to reading a DFD is to use the following four steps (1) Identify the agents (internal and external) (2) Identify events (3) Identify database tables (4) contact the data flows How are accounting systems developed today? * Today, most accounting systems are developed in two peaks.First, baseline accounting software is selected. Then the accounting software is customized to meet the enterprises specific needs. How is customization of accounting systems put down? * Customizing an accounting system involves documenting the specific needs of the enterprise using data flow diagrams to provide a detailed view of the enterprises business processes. Each module of the baseline model can be customized to meet the enterprises needs. Additional modules susceptibility also be needed to provide the infallible customization, such as a production module to track manufacturing costs.Chapter 5 BUSINESS PROCESSES 1. interruption Analysis refers to analyzing the prisonbre ak between the baseline modules and the customization required to meet enterprise-specific needs. 2. tumid Bang refers to when all system modules are built and implemented for the good enterprise at the same time. 3. Stages refers to when modules or locations for a new system are built and implemented stage by stage alternatively of all at once. How are business processes documented? * The baseline accounting system can be customized using data flow diagrams (DFDs) to document the enterprises business processes.What is gap analysis? * A gap analysis identifies the gap between the selected baseline system, such as SAP, and the customization required by the specific enterprise. What is the difference between the big work stoppage approach and stages approach to customization? * The two approaches to customization are big bang and stages. The big bang approach is used when all the modules are built and implemented for the entire enterprise at the same time. The stages approach invol ves completing modules or locations stage by stage instead of all at once. What is a workflow management system? Workflow management systems automate workflow by automatically forwarding the electronic document to the next step in the business process. Chapter 6 INTEGRATED ENTERPRISE SYSTEMS 1. Order-to-cash corresponds to the sales cycle 2. Procure-to-pay corresponds to the purchasing cycle 3. Spaghetti code programming code used to connect complete systems 4. Three-tier architecture when an enterprise system uses layers of IT components enterprise database, application, and client computers 5. Firewall software programs on a router that monitor network traffic 6.Business process management (BPM) transforming business processes to improve efficiency Top Reasons for Failed ERPs include the following (1) phantasmagoric budget. Underestimated costs. Overestimated benefits. (2) Unrealistic schedule. Not enough time allowed for project completion. (3) Not a good fit. User requ irements are not net. Baseline system not a good fit with business processes. (4) Too much change. Failure to break employees on changes to expect. Lack of adequate change management. (5) Lack of project necromancer at the top. Commitment by top management is lacking to bomber the project.What are advantages of an corporate enterprise system? * The integrated enterprise system offers many advantages over the functional silo approach to enterprise systems. The accounting functions are integrated into the larger enterprise system, permitting accounting to share data with other functional areas and better coordinate activities. What are challenges associated with an integrated enterprise system? * Challenges of an integrated enterprise system include business processes that may need to be redesigned and managing the changes required by the new system. How is data entered in an integrated enterprise system? Database forms that relate to business process activities permit users to en ter data once into the IES and have the data shared throughout the enterprise, eliminating the need for different functional areas to rekey the same data. How does an integrated enterprise system relate to the accounting system? * Integrated enterprise system use a modular approach that is consistent with the baseline accounting system model. The base module names may vary but the functions are basically the same. Integrated enterprise systems integrate accounting with other modules for an enterprise.Customer and vendor systems can also be integrated. Chapter 10 FRAUD AND INTERNAL CONTROL 1. Entity-level IT controls processes, organization structure, and leadership for IT to support an organizations business strategy and objectives, such as internal analyses 2. IT general controls controls that apply to IT function in general and ensure continued IT operation and availability, such as change and access controls 3. Application controls controls embedded within business proces s applications, such as accounting software controls A.Classification by the control objectives specified in the COSO internal control framework i. Operation controls controls to ensure that operations are accomplished appropriately, such as the timing of cash disbursements to ensure that late fees are avoided ii. Financial controls controls to ensure that external financial reports are prepared on a timely basis in shape with laws, regulation, or contractual agreements iii. Compliance controls controls to maintain confidentiality of information in accordance with all relevant laws and regulations B.Classification by how the process is completed iv. Manual controls controls performed without the assistance of technology v. alter controls controls performed automatically by computers 1. Input controls controls over data entered into the system 2. bear on controls controls to ensure that amounts have been processed appropriately 3. Output controls controls to ensure that reports are distributed only to appropriate users vi. Hybrid controls a combination of manual and automated controls What is SOX and how does it see the accounting system? Sarbanes-Oxley (SOX) legislation resulted from the accounting scandals of 2002. This legislation requires organizations to use recognized framework for internal controls. As a result, many organizations select COSOs Internal Control Integrated Framework and the COBIT framework for IT controls What is IT control architecture? * IT control architecture is a traffic pattern for IT controls in the organization. This blueprint shows that internal control impacts IT at three levels within the organization resulting in three levels of IT controls * Entity-level IT controls Application controls * IT general controls How can control weaknesses be documented? (1) Build a DFD (2) chronicle preventive and selective controls on the DFD (3) Document control HotSpots on the DFD Fraud and abuse can be sort into three broa d categories (1) Corruption, such as bribery (2) Misappropriation of assets, including stealing of cash, fraudulent disbursements, or stealing merchandise (3) Fraudulent financial account, such as misstating financial statements in order to meet earning targets. Three elements required to prove fraud are the followings 1) A material false statement is made with the intent to deceive (2) A victim relies upon the false statement (3) The victim incurs damages The fraud triangle depicts the three conditions that typically must exist in order for a fraud to be perpetrated (1) author reason for committing the fraud, such as financial difficulties (2) Opportunity access to the asset or financial statements in order to carry out the fraud (3) Means knowledge or skills that permit the perpetrator to commit the abuse Internal Control is a process, effected by an entitys come on of directors, management, and other personnel.This process is designed to provide reasonable assurance regar ding the accomplishment of objectives in usefulness and efficiency of operations, reliability of financial insurance coverage, and compliance with relevant laws and regulations. SOX (Sarbanes-Oxley Act) emphasize a strong system of internal control as a means of avoiding Enron-sized accounting frauds. SOX Requirements to remember (1) Section 302. Corporate duty for financial reports (2) Section 404. Management assessment of internal controls (3) Section 806.Protection for employees of in public traded companies who provide tell of fraud (4) Section 906. Corporate responsibility for financial reports scrutinise and Internal Controls (SOX) (1) Audit of internal control tests of controls to obtain evidence that internal control over financial describe has operated effectively (2) Audit of financial statements tests of controls to assess venture and substantive procedures to collect evidence regarding the accuracy, completeness (3) IT scrutinize audit of IT controls 4) Inte grated audit integrates an audit of internal control with an audit of financial statements There are two types of deficiencies that may be put together in internal control over financial reporting (1) hearty weakness deficiency that results in a reasonable possibility that a material misstatement of financial statements will not be prevented or spy on a timely basis (2) Significant deficiency a deficiency in internal control over financial reporting that is less severe than a material weakness COSO (Committee of Sponsoring Organization of the Treadway Com delegacy) Internal Control Objectives 1) hard-hittingness and efficiency of operations (2) Reliability of financial reporting (3) Compliance with laws and regulation Internal Control Components (1) Control environment control environment factors include integrity and ethical values, importance of board directors, management philosophy and operating style, organization structure, commitment to financial reporting competencie s, assurance and responsibility, and human resources (2) jeopardy of exposure assessment involves identifying, analyzing, and managing risks that affect a companys ability to record, process, summarize, and report financial data properly.Risk assessment control objectives include the following A. Importance of financial reporting objectives B. Identification and analysis of financial reporting risks C. Assessment of fraud risk (3) Control activities include policies and procedures to rationalize risks including financial, operational, and compliance controls. Control activities include the following D. Segregation of duties to divide authorization, recording, and asset custody among different individuals E. Independent reconciliations of assets and accounting records such as stick statement reconciliations and inventory reconciliations F.Physical controls to provide for physical shelter of assets, such as security cameras and restricted access to corporate buildings G. IT controls to ensure appropriate information processing, authorization, and data integrity. (E. g. Data validation) (4) discipline and communication includes the accounting system for identifying, recording, processing, and reporting transactions and financial data. An organizations system produces reports, containing operational, financial, and compliance information.Internal control principles related to this component include information technology, information needs, information control, management communication, upstream communication, board communication, and communication with external parties (5) Monitoring involves assessing internal controls as well as the process for taking corrective action if needed. Effective monitoring includes H. Ongoing monitoring such as controls over purchasing I. Separate evaluations such as an internal audit that assesses internal controls. J.Upstream communication to report internal control deficiencies COBIT (Control Objectives for Infor mation and related Technology) Three Dimensions (1) IT Resources can be divided into the following four categories A. Application consists of manual and programmed procedures to process information B. Information includes structured and unstructured data in any form, such as text, graphics, pictures, audio and video. Data is input, processed, and output by the system C. Infrastructure refers to IT technology including hardware and software. It may also include physical structures, such as a data center facility D.People includes staff members as well as their knowledge and skills to plan, organize, acquire, implement, deliver, support, monitor, and evaluate IT processes and systems (2) IT Processes deliver information, run applications, and use infrastructure and people to accomplish IT goals in light of business requirements. IT processes are grouped into the following four universes E. Plan and Organize (PO) scope relates to IT strategy and tactics to contribute to attainin g business goals F. Acquire and Implement (AI) domain identifies, acquires (built or bought), and implements IT solutions.Also ensures that the SDLC phases and activities are used when upgrading and modifying current systems G. Deliver and Support (DS) domain concerned with the delivery of IT services. Encompasses IT operations, security and training. Assures the continued support and maintenance of these services H. Monitor and Evaluate (ME) domain monitors IT processes for compliance with control requirements. Includes management solicitude of control processes as well as independent assurance services provided by internal and external audits (3) Business Requirements (Information Criteria) I.Three criteria relate to the information security confidentiality, integrity, availability (CIA) J. For the remaining four criteria, COBIT relies upon definitions used by COSOs Internal Control Integrated Framework (Effectiveness, Efficiency, Reliability, Compliance) Chapter 11 CYBERSEC URITY What are the 10 domains of cybersecurity? (1) Legal, regulations, compliance, and investigations (2) Information security and risk management (3) Security architecture and design (4) Telecommunications, network, and network security (5) Control access (6) Operations security (7) Physical and environmental security 8) Application security (9) Business continuity and disaster be restoredy (10) Cryptography What is the scope of cybersecurity in the accounting system? * Cybersecurity in an enterprise is not limited to just guarding against hackers and cyberattacks. It involves many aspects of enterprise operations, including how you train and spring up your employees about security awareness to safeguarding information assets, how to implement new technologies in a security conscious manner, how to maintain backups in order to recover and continue business operations, and how to provide the highest level of security in a cost-effective wayWhy is encryption important in securin g accounting data? * For accounting purposes, encryption provides an especially valuable tool offering increased data integrity and confidentiality. Encryption can be used for accounting data in transit and for accounting data stored in the database. If an attacker is thriving in penetrating the enterprise security and reaches the database, encryption of the stored data is an redundant line of defense *Refer to yack away PPT slides for more detailed information regarding key terms.Chapter 12 THE RISK INTELLIGENT ENTERPRISE What is a risk intelligent enterprise? * The risk intelligent enterprise moves beyond security and controls to managing risk and then to using risk to create value What is the enterprise risk management (ERM) framework? * The ERM framework offers guidance to enterprises implementing enterprise risk management. ERM units may consist of entity-level units, divisions, business units, and/or subsidiaries * The four ERM objectives are strategic relate to goals tha t support the entitys mission * Operational relate to the effective and efficient use of the entitys resources * Reporting relate to the reliability of the enterprises reporting, both internal and external * Compliance relates to the entitys compliance with all applicable laws and regulations * The eight ERM components consist of * Internal environment involves the risk management philosophy of the enterprise, including the tone set by top management. Risk resilience, risk appetite, risk tolerance, integrity, and ethical values also affect the nternal environment * Objective setting setting objectives that are consistent with the entitys mission and risk appetite * Event identification involves identifying potential events that capacity affect the entity. Events can be either internal events or external events that might affect the entitys ability to achieve objectives. * Risk assessment the process of assessing the extent to which events would impact an entitys ability to a chieve its objectives (impact/likelihood) * Risk answer (avoidance/reduction/sharing/acceptance) * Control activities Information and communication * Monitoring What is spreadsheet risk management? * A significant risk for many enterprises is the widespread use of spreadsheets with limited controls. A spreadsheet risk management program includes using access and change controls with spreadsheets in order to be SOX compliant Chapter 13 ACCOUNTING SYSTEM DEVELOPMENT * This chapter explains stages of SDLC (Software Development Life Cycle) and SDM (Software Development Methodologies). Refer to Lecture PPT slides for more information.