AISCH04 Transaction Processing and the Internal Control Process

Accounting Information Systems, 9/e 2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Transaction Processing and
2004 Prentice Hall Business Publishing, Accounting Information Systems, 9/e, by Bodnar/Hopwood
Learning Objective 1
Understand the nature
of control exposures.
Controls and Exposures
by its probability of occurrence.
Controls rarely affect the causes of exposures.
Common Exposures
Fraud and White-Collar Crime
What is white-collar crime?
from other illegal activities in that they occur
as part of the occupation of the offender.
It often involves the entry of fictitious
transactions into an accounting system.
fraudulent financial reporting.
benefits a company or organization rather
than the individuals who perpetrate the fraud.
What is forensic accounting?
who are concerned with preventing and
detecting fraud and white-collar crime.
Computer Processing
and Exposures
Control Objectives
may be grouped according to four
common cycles of business activity.
Control Objectives
Control Objectives
with management’s criteria.
authorized in accordance with management’s criteria.
All shipments of goods and services provided
should result in a billing to the customer.
Billings to customers should be accurately and
promptly classified, summarized, and reported.
Control Objectives
be permitted only in accordance with management’s criteria.
Amounts due to vendors should be accurately and
promptly classified, summarized, and reported.
Compensation rates and payroll deductions should be
authorized in accordance with management’s criteria.
Control Objectives
accordance with management’s criteria.
Cost of goods manufactured should be
accurately and promptly classified,
Control Objectives
only in accordance with management’s criteria.
The amounts and timing of debt transactions
should be authorized in accordance with
management’s criteria.
internal control process.
External Influences Concerning
The Federal Foreign Corrupt Practices Act of
1977 (FCPA) is a specific legal requirement
that concerns many organizations.
the Securities Exchange Act of 1934 to...
the transactions and dispositions
devise and maintain a system of internal
accounting controls sufficient to
provide reasonable assurance that...
1. transactions are executed in accordance
with management’s authorization;
3. access to assets is permitted only in
accordance with management’s authorization;
4. the recorded accountability for assets
is compared with the existing assets.
5-member Public Company
Accounting Oversight Board
Conflicts of interest
Prohibition on personal loans
to executives and directors
Components of the Internal
1. Control environment
2. Risk assessment
3. Control activities
Control Environment
environment are as follows:
Integrity and ethical values
Control Environment
Organizational structure
Human resource policies and procedures
Management philosophy and operating style
Control Environment
Dual control
resources and procedures?
Risk Assessment
identifying, analyzing, and managing
The second component of internal
control is risk assessment.
Control Activities
to provide reasonable assurance that the
following control objectives are met:
The third component of internal
control is control activities.
Control Activities
documents and records
accordance with management’s authorization.
Control Activities
on the accountability of assets and performance.
Information processing controls are applied
to check the proper authorization, accuracy,
and completeness of individual transactions.
Information and Communication
is information and communication.
Information refers to the
organization’s accounting system.
understanding regarding all policies
Information and Communication
An audit trail is comprised of the documentary
evidence of the various control techniques that
a transaction was subject to during its processing.
Monitoring
control is monitoring.
assessing the quality of internal
controls over time and taking
corrective actions when necessary.
Transaction Processing Controls
Transaction processing controls
General operating procedures
Equipment control features
Communicating the Objectives
of Internal Control
control is to influence the behavior
of people in a business system.
Goals and Behavioral Patterns
of an information system?
Goals and Behavioral Patterns
two or more people to commit fraud.
What factors may influence an individual’s
behavior in a control system?
Formal plan of organization and methods employed
Groups and informal pressure
analyze internal control systems.
Analysis of Internal
information concerning the following:
Analytical Techniques
a common analytical technique
Questionnaires are essentially checklists
an area of major importance.
Analytical Techniques
Write-ups
Flowcharts
End of Chapter 4

AISCH04 Transaction Processing and the Internal Control Process

Documents

Transcript of AISCH04 Transaction Processing and the Internal Control Process