Accounting Information Systems (Day 02)

1. What is considered a strong internal control structure?

In cases of employee fraud, weak internal controls are usually present.

Management frauds, however, are usually committed at a level above the one to which internal controls generally relate.

2. The Sarbanes-Oxley Act requires all audit committee members to be independent and requires the audit committee to hire and oversee the external auditors. This provision is consistent with many investors who consider the board composition to be a critical investment factor.

3. What is control risk?

It is an absence or weakness of an internal control.

4. What are non-auditing activities?

5. What are bookkeeping services?

Bookkeeping services include, but are not limited to, maintaining and evaluating financial transaction records in books of account such as sales, purchase, cash journals, ledgers or computerised accounting systems, preparing budget or income expenditure report, profit and loss statements and trial balances, and the making of statutory returns as permitted by law, not the making of any subjective decisions in relation thereto. Examples include:

payroll services
data entry of revenue and expenses
basic depreciation calculations.

6. What is financial planning?

Financial planning means providing advice in respect of a client’s personal financial affairs, specifically related to wealth management, retirement planning, estate planning, risk management and related product advice. This includes:

1. investment advice
2. superannuation advice
3. estate planning
4. insurance
5. financial counseling.

7. Differences between external auditing, internal auditing, and information technology auditing?

External auditing is often called independent auditing because certified public accounting (CPA) firms that are independent of the client organization’s management perform them.

External auditors represent the interests of third-party stakeholders in the organization, such as stockholders, creditors, and government agencies.

IT auditing is usually performed as part of a broader financial audit. The IT auditor attests to the effectiveness of a client’s IT controls to establish their degree of compliance with prescribed standards. Because many of the modern organization’s internal controls are computerized, the IT audit may be a large portion of the overall audit.

Internal auditing is an appraisal function housed within the organization. Internal auditors perform a

wide range of activities on behalf of the organization, including conducting financial statement audits, examining an operation’s compliance with organizational policies, reviewing the organization’s compliance with legal obligations, evaluating operational efficiency, detecting and pursuing fraud within the firm, and conducting IT audits. 

External auditors represent third-party outsiders, whereas internal auditors represent the interests

of management.

8. What is auditing?

Auditing is a form of independent attestation performed by an expert—the auditor—who expresses an opinion about the fairness of a company’s financial statements.

9. What are non-accounting activities?

They include actuarial services, internal audit outsourcing services, and consulting.

10.  Who are stakeholders?

Stakeholders are individuals inside or outside the firm who have an interest in the system but are not end users. They include management, internal auditors, and consultants who oversee systems development.

11. Who are systems professionals?

Systems professionals include systems analysts, database designers, and programmers who design and build the system. Systems professionals gather facts about the user’s problem, analyze the facts, and formulate a solution. The product of their efforts is a new information system.

12. Who are end-users?

End users are those for whom the system is built. They are the managers who receive reports from the system and the operations personnel who work directly with the system as part of their daily responsibilities.

13. Code of ethics

The company’s code of ethics should outline procedures for dealing with actual or apparent conflicts of interest between personal and professional relationships.

Whereas avoidance is the best policy, sometimes conflicts are unavoidable. Thus, one’s handling and full disclosure of the matter become the ethical concern.

References:
1. CPA Website, GUIDE TO PUBLIC ACCOUNTING SERVICES, https://www.cpaaustralia.com.au/professional-resources/public-practice/getting-started-in-public-practice/guide-to-public-accounting-services.

2. Hall, James A. (2014) Accounting Information Systems, 9th edition, South-western Cengage Learning.

Accounting Information Systems (Day 01)

1. What is a goal?

A goal is something that we want to achieve in the end.

E.g. The goal of Conceptual Data Modeling is to develop an entity-relationship model that represents
the information requirements of the business.

2. What is a system in the context of Accounting Information System?

3. What is an Accounting Information System (AIS)? What is it used for?

AIS is used to provide information for decision makers. Information including

• Financial statements
• Managerial reports
• Reports to meet compliance requirements
• Information required by many different groups

An AIS is a collection of resources, such as people and equipment, designed to transform financial and other data into information.

4. What is an enterprise?


5. What is Transaction Processing System (TPS)? What is it used for?

TPS is used to process transactions by grouping them into Accounting cycles such as

• Revenue
• Expenditure
• Human Resources/Payroll
• Production
• Financing

6. What is General Ledger/Financial Reporting System (GL/FRS)?

7. What is Management Reporting System (MRS)?

8. What is Accounting?

9. What are financial transactions and nonfinancial transactions?

A financial transaction is an economic event that affects the assets and equities of the organization, is reflected in its accounts, and is measured in monetary terms. For examples, sales of products to customers, purchases of inventory from vendors, and cash disbursements and receipts are examples of financial transactions.

Nonfinancial transactions are events that do not meet the narrow definition of a financial transaction. For example, adding a new supplier of raw materials to the list of valid suppliers is an event that may be processed by the enterprise’s information system as a transaction. Important as this information obviously is, it is not a financial transaction, and the firm has no legal obligation to process it correctly or at all.

10. Do you need an ACN if you are a sole trader?

ASIC issues an Australian Company Number (ACN) for use in all business transactions. You need this before applying for an ABN. Additionally, partnerships, trusts and companies need a separate tax file number (TFN) to do business. (Sole traders use their personal TFN when dealing with any business tax matters).

11. What is the difference between a private limited company and a sole trader?
A limited company is its own legal identity, so as a shareholder your liability is limited (hence the name 'limited by shares'). As a sole trader, there is little distinction between you and the business. Any business debts become your debts and your personal assets - including your house - are not protected.

12. Is there a difference between sole trader and self-employed?

A sole trader is personally responsible for any losses that the business makes and responsible for paying tax on profits. A sole trader is a self-employed person who is the sole owner of their business. Sole traders do not have to have a director or register with companies' house.

13. What is an ERP?

Enterprise resource planning (ERP) system: a system that integrates all aspects of an organization’s activities—such as accounting, finance, marketing, human resources, manufacturing, inventory management—into one system. An ERP system is modularized; companies can purchase the individual modules that meet their specific needs. An ERP facilitates information flow among the company’s various business functions and manages communications with outside stakeholders.

14. What is EUS?

End-user system (EUS): a system developed by users, rather than information systems professionals, to meet their information needs. An EUS often draws upon the information in existing corporate databases to meet users’ information needs.

References:
1. Hall, James A. (2014) Accounting Information Systems, 9th edition, South-western Cengage Learning.
2. Romney, M.B. & Steinbart, P.J. (2009) Accounting Information Systems, 11th edition, Prentice Hall.