8.3 Accounting System Cycle and System Development and Maintenance Flashcards
General ledger, reporting, financing cycle: what is essential?
Generate timely, accurate financial report.
General ledger, reporting, financing cycle: what is it concerned with?
- Generating needed financing
* Completing accounting activities to generate financial reports
Financing cycle: describe the 3 steps.
- Gets funds from revenue
- Provides funds to expenditure and HR/Payroll
- Provides data to to general ledger and reporting
General ledger, reporting cycle: what are 2 steps?
- Gets data from all cycles
* Provides info for internal and external users
General ledger, reporting, financing cycle: Core activities?
- Receive input
- Create and post adjusting entries
- Reporting
General ledger, reporting, financing cycle: Core activities: Describe receive input.
- Receive transactions from other cycles
- Financing and investing: receive info about financing and investing activities
- Budgeting: receive budgets, primarily for managerial accounting reports
General ledger, reporting, financing cycle: Core activities: Describe reporting.
- Prepare FS (e.g. BS, IS, Stmt of Cash flows)
* Produce Managerial reports
General ledger, reporting, financing cycle: what are inherent risk most related to financing?
Lease accounting, loan covenants, and related-party transactions.
*Hiding obligations (e.g. loans) to major shareholders or officers that are unrecorded
General ledger, reporting, financing cycle: what are other inherent risk?
FS fraud: e.g. manual adjusting entires.
*Unusual or unjustified manual adjusting entries may be an indicator of “managing” (falsifying) earnings.
General ledger, reporting, financing cycle: Who are relevant stakeholders?
Creditors, shareholders, regulators, external auditors.
General ledger, reporting, financing cycle: What are important files, forms, documents?
- General ledger
- General journal
- Financial Statements
General ledger, reporting, financing cycle: Purpose: general ledger?
Structure for accumulating accounting information based on chart of accounts, which is the listing of accounts available for recording accounting entries.
General ledger, reporting, financing cycle: Purpose: General journal?
Journal for recording non-routine, including closing and reversing entries.
General ledger, reporting, financing cycle: Purpose: FS?
Report on the financial condition of the entity.
General ledger, reporting, financing cycle: What are relevant controls?
- Accounting policies and procedures are approved, documented, and consistent with law, regulation and organizational policies.
- Investment and financing activities are approved, documented, and consistent with law, regulation and organizational policies.
General ledger, reporting, financing cycle: what are accounting and business risks?
Journal entry risks
- Incorrect or fraudulent journal entries
- Transactions not recorded or not posted
- Inadequate authorization for journal entries
- Imbalances between debit and credit balance accounts
Control and subsidiary account risks
*Control accounts are out-of-balance with subsidiary ledgers
Financial reporting
*Financial reports are inaccurate, unreliable or not timely
General ledger, reporting, financing cycle: what are compliance reports?
Reports for governmental agencies to comply with laws or regulations e.g., related to environmental impact, securities.
General ledger, reporting, financing cycle: what are control and subsidiary accounts?
Subsidiary accounts maintain the details but in the aggregate, sum to the control account balance.
E.g. accounts receivable control and subsidiary accounts
General ledger, reporting, financing cycle: what is the purpose of closing journal entries?
Transfer balances in temporary accounts to retained earnings.
Systems Development: What are purpose?
Ensure systems are delivered on time, they are high quality, and delivered on budget.
Systems Development: wha are 3 steps to achieve the purpose?
A structured approach includes;
- Identify roles and responsibilities
- Establish activities and critical development path
- Define project review and approval in development
Systems Development: risks?
- Does not work
- Cost too much
- Time (behind schedule)
Systems Development: what are reasons for failures?
- Lack of senior management knowledge of, and support and involvement in, major IT projects
- Difficulty in specifying requirements
- Emerging technologies (hardware and software) may not work
- Lack of standardized project management and methods
- Resistance to change: lack of proper “change management”
- Scope and project creep: negotiation with too much users’ want.
- Lack of user participation and support
- Inadequate testing and training
- Poor project management: underestimation of time, resources, scope
Systems Development: what is a traditional method?
Systems Development Life Cycle (SDLC)
Systems Development: SDLC: what are roles?
- IT steering committee
- Lead systems analyst
- Systems analysts and application programmers
- End users
Systems Development: SDLC: what does IT steering committee do?
- Linking commitment of IT resources to the strategic plan of organization
- Review, approve, and prioritize system development proposals
- Oversight
Systems Development: SDLC: who is included in IT steering committee?
Members from IT dept and functional user areas.
Systems Development: SDLC: IT steering committee: hierarchy?
- Executive IT steering committee
- Strategic plan
- *Strategic plan working team
* Communication team
* Arch and standards working team
* Data admin, security and data warehousing
Systems Development: SDLC: what does Lead systems analyst do?
- Manage development teams and projects
- Direct contact with end users
- Usually responsible for developing overall programming logic and functionality
Systems Development: SDLC: what does systems analysts and application programmers do?
- Design, create and test system, programs, and controls in partnership with users
- Write and coordinate writing of code, project development
Systems Development: SDLC: what does end users do?
*Identify problems and often suggest first-pass solutions
Systems Development: SDLC: what is the model used and what are 7 stages?
Waterfall model.
- Planning and feasibility
- Analysis/requirements
- Design
- Development
- Testing
- Implementation
- Maintenance
Systems Development: SDLC: what stages of Waterfall model fall into “system planning and building”?
- Planning and feasibility
- Analysis and requirements
3, 4. Design and development
Systems Development: SDLC: what stages of Waterfall model fall into “Implementing, testing and maintaining”?
- Testing
- Implementation
- Maintenance
Systems Development: SDLC: Planning and feasibility: what are 3 detentions?
- Technical: can it be built?
- Economic: is it cost effective?
- Operational: will it meet user needs?
Systems Development: SDLC: Planning and feasibility: If feasible, what must be created?
Project plan, including;
- Critical success factors; what must happen to succeed
- Scope: project purpose and most important goals
- Major risks: money? delivery date? technology?
- Milestones and responsibilities; who will do what, when?
Systems Development: SDLC: Analysis and requirement: who does what?
Systems analysts partner with end users to;
- Understand business processes and purposes
- Document system requirements
Systems Development: SDLC: Analysis and requirement: what is the document for system requirement? What is an important element?
Document that identifies system functionality framework for system design and development.
Parties sign to signify agreement on requirements.
Systems Development: SDLC: Analysis and requirement: what is JAD?
Joint Application Development: collaboration of IT personnel and end users to define system.
Systems Development: SDLC: Analysis and requirement: what are roles of accountants/internal auditors?
- Prepare or evaluation of RFP (request of proposals) for hardware or software
- Vendor evaluations: reliability (financial and product), service commitment, training, tech support, documentation
e. g. economic analysis, financial reporting issues, identification of problems to be solved, auditing and system audibility issues, control design and monitoring, project monitoring
Systems Development: SDLC: Design: what is done?
Define systems’ technical specifications.
Systems Development: SDLC: Design: what are 2 components?
- Technical architecture specification: define hardware, systems software and networking technology of system
- Systems model specification:
* graphical models (flowcharts, etc) describing system components and process
* create system menus and screen formats
Systems Development: SDLC: Development: who does what?
- Programmers use design specifications to develop the program and data files
- Purchase hardware and IT infrastructure specified in design
Systems Development: SDLC: Testing: what is confirmed?
If system meet the design specifications in the requirements definition.
Systems Development: SDLC: Testing: how must it be tested?
- With both correct and erroneous data
* At expected operational loads
Systems Development: SDLC: Testing: what are types?
- Individual processing unit: each component works
- System testing: modules work together
- Inter-system testing: system works with other systems
- User acceptance: system meets business needs
Systems Development: SDLC: Implementation: what does it include?
- Data conversion (old data into new format)
* User training
Systems Development: SDLC: Maintenance: what does it do?
- Monitor and update programs and/or procedures
* System updates return to start of SDLC process
Systems Development: describe the pilot implementation method for new systems.
*Similar to phased implementation, except divid users into smaller groups and train by groups (vs. by modules)
Systems Development: what is “cold turkey”?
Also called the “plunge” or “big bang”.
Old system is dropped and the new system is put in place all at once.
