9. Osborne - New technology and data security

Question 1

New Technology and Data Security (CH9)

What are the Benefits of Automation in Accounting?

Answer 1

1. Improved data integrity: the chance of human error is reduced.

2. More time-efficient approval of documents.

3. Greater internal data visibility: the business has easy access to data.

4. Quicker payment from customers

Question 2

New Technology and Data Security (CH9)

What is Artificial Intelligence (AI)?

Answer 2

Artificial intelligence (Al), simply, it is the concept of a computer, or machine, being able to simulate the way that humans think and behave.

Question 3

New Technology and Data Security (CH9)

What is Machine Learning?

Answer 3

Machine learning is an application of Al that codes computers to learn from data, without being programmed explicitly.

Question 4

New Technology and Data Security (CH9)

What are the benefits of AI and Machine Learning in Accounting?

Answer 4

1. Coding of data — automatic coding of invoices, receipts and purchases should lead to accurate and prompt reporting.

2. Audit of information — large amounts of data can be reviewed quickly, and any ‘unusual’ items can be highlighted and investigated.

3. Forecasting future data — Al could use its predicative capabilities to forecast future events. Examples of this might be price changes, movement in exchange rates, or customer buying trends.

4. Analysing complex data — properly developed Al and machine learning can be used to carry out complex analysis, that would require training for finance staff.

Question 5

New Technology and Data Security (CH9)

What is a Blockchain?

Answer 5

A Blockchain is a digital ledger of transactions that is shared across an entire network of computers in the particular blockchain.

Question 6

New Technology and Data Security (CH9)

What is the benefit of a Blockchain?

Answer 6

Because the information is duplicated and shared across a huge number of users within the blockchain, it means that records of transactions cannot be altered, deleted or destroyed.

Question 7

New Technology and Data Security (CH9)

How does a Blockchain work?

Answer 7

1. A transaction is created.
2. A block is created to digitally represent the transaction.
3. The block is distributed to every computer in the network.
4. Every computer validates the transaction to prove it is authentic.
5. The now authenticated and complete block is added to the chain.

Question 8

New Technology and Data Security (CH9)

How can a Blockchain be useful in Accounting systems?

Answer 8

Blockchain can be very useful in accounting systems by:

• Providing certainty about the ownership of assets.
• Maintaining ledgers of accurate information.
• Reducing costs and improving efficiency by taking on the record keeping so that staff can carry out other work.

Question 9

New Technology and Data Security (CH9)

What are the Benefits of Electronic Filing of Documents?

Answer 9

The benefits of electronic filing are:
- Instant access is available to any authorised users, at any time.
- Frees up physical space which can be used for other things, and may save money.
- Reduces the need to make copies of documents as multiple users can access the files.
- Files will be better organised.
- Files are automatically backed up and less susceptible to natural disasters such as fire or flood.
- Productivity will improve as files are more easily accessed.

Question 10

New Technology and Data Security (CH9)

What are the Disadvantages of Electronic Filing of Documents?

Answer 10

However, there are some disadvantages of this method of filing:

• Software used to maintain the filing system will need to be kept up-to-date.
• There is likely to be a significant initial cost to set up the system.
• There will be a risk of data breaches which will need to be addressed.

Question 11

New Technology and Data Security (CH9)

What are the 3 methods of signing Documents Electronically?

Answer 11

• Simple electronic signatures: such as scanning a physical signature or using tick boxes with a declaration from th signatory that they agreed to the terms, or similar.
• Advanced electronic signatures: these will be uniquely linked to the signatory by an electronic identifier. This might be an application on their mobile phone that they need to use in order to validate their signature on an electronic document.
• Qualified electronic signatures: this is effectively an electronic version of getting the signature witnessed. Similar to an advanced electronic signature, it has the additional security of electronic validation by a third-party trust service provider (TSP) which checks the associated matching criteria and validates the signature.

Question 12

New Technology and Data Security (CH9)

What is Data Analytics?

Answer 12

Data analytics is the process of collecting, organising and analysing large amounts of data.

Question 13

New Technology and Data Security (CH9)

Name the 4 types of Data Analytics.

Answer 13

The four types of data analytics are:

1. Descriptive — what has happened in the business?
2. Diagnostic — why did it happen?
3. Predictive —what is likely to happen next?
4. Prescriptive — what action do we need to take now?

Question 14

New Technology and Data Security (CH9)

Explain the 4 types of Data Analytics.

Answer 14

The four types of data analytics are:

1. Descriptive — what has happened in the business? This type of data analytics looks and reports on past performance, with no further explanation. For example, a report detailing the monthly sales of each division of the business.

2. Diagnostic — why did it happen? This digs a bit deeper by doing detailed analysis on the causes of things that have happened. A simple example might be analysis of why the sales of each product have changed month on month.

3. Predictive — what is likely to happen next? Predicative data analytics is very important for business to produce accurate forecasts. It uses large volumes of data to make its predications but it important to remember that, like human forecasting, it can never be 100% accurate.

4. Prescriptive — what action do we need to take now? Prescriptive data analytics may use a combination of machine algorithms (complex mathematical tools) and rules set by the business to make recommendations or for problem solving.

Question 15

New Technology and Data Security (CH9)

How is Data Analytics Beneficial in Accounting?

Answer 15

• Its ability to handle large volumes of data quickly can speed up the reporting processes in accounting function so decision-making will be quicker.
• It may also reduce the risk of fraud as it can identify anomalies in information and then diagnose why these may have happened.
• Data analytics can also help a business to decide which activities to focus on and prioritise them.

Question 16

New Technology and Data Security (CH9)

What is Outsourcing?

Answer 16

Outsourcing: When businesses use a third party to carry out tasks, provide services or handle operations that the business has previously done in-house.

Question 17

New Technology and Data Security (CH9)

What are the Advantages of Outsourcing?

Answer 17

• Potential cost savings, such as lower payroll costs due to reduced staff numbers, reduced training costs, and reduced capital expenditure.
• Staff time freed up to carry our core operations.
• Benefitting from the expertise of the business to which the work has been outsourced.
• The business may no longer need to comply with certain regulations and legislation if it no longer carries out certain operations itself.

Question 18

New Technology and Data Security (CH9)

What are the Disadvantages of Outsourcing?

Answer 18

• May lose expertise.
• Quality issues if the outsourcing business does not have the same level of skills.
• Difficulties in moving the work back in-house, should the business want to, at a later date.
• **Data security **- for example if the outsourcing business needs to see product designs, or have access to confidential business data such as payroll records.
• May lead to some redundancies.
• Cost increases.
• May be a delay in the delivery of the outsourced items, which could disrupt supply.

Question 19

New Technology and Data Security (CH9)

What are the potential obstacles of Offshoring?

Answer 19

• Language Barriers
• Cultural Barriers

Question 20

New Technology and Data Security (CH9)

What are the potential Advantages of Offshoring?

Answer 20

• Reduced Costs.
• Higher visibility for the business overseas.

Question 21

New Technology and Data Security (CH9)

What is Offshoring?

Answer 21

Offshoring is the relocation of some of the organisation’s operations to another country. This is normally done by businesses in developed countries to less developed counties with the intention of reducing cost.

Question 22

New Technology and Data Security (CH9)

What is Cloud Accounting?

Answer 22

• Cloud accounting is an accounting system that is accessed via the internet, with information stored on remote, secure servers, owned by the system provider. Users will subscribe to the system and all their accounting records will be held in the cloud.

Question 23

New Technology and Data Security (CH9)

What are the features of Cloud Accounting?

Answer 23

• Remote access.
  • Remote data storage.
  • Shared access.
  • Multi-user access.
  • Automated capabilities.
  • Availability of apps/plug-ins/add-ins
  • Interaction with stakeholders - stakeholders packages include a dashboard that allows accounting data to be presented in a clear, easy to understand format.
  • Real-time data - the data held in the cloud accounting system is always up-to-date.

Question 24

New Technology and Data Security (CH9)

Benefits of Cloud Accounting

Answer 24

• Lower IT costs.
• Improved sustainability.
• Better security.

Question 25

New Technology and Data Security (CH9)

Drawbacks of Cloud Accounting

Answer 25

• Reliance on internet access.
• Data security.
• Software requirements.
• Switching may be difficult.

Question 26

New Technology and Data Security (CH9)

What is the purpose of The Data Protection Act?

Answer 26

The Data Protection Act provides a framework to ensure that personal information is handled properly.

Question 27

New Technology and Data Security (CH9)

What are the Principles of The Data Protection Act?

Answer 27

• Lawfulness, fairness, and transparency
• Purpose limitation - personal data should be used only for the explicit purpose for which it was given.
• Data minimisation - personal data that is collected by an organisation should be only what is necessary for the specific purpose.
• Accuracy - a business that collects personal data is responsible for ensuring that the data is accurate and that it is kept up-to-date.
• Storage limitation - any personal data stored by a business must not be kept any longer than is necessary.
• Integrity and Confidentiality - personal data must be kept secure and protected from unauthorised access.
• Accountability - appropriate measures and records must be in place to prove that it is complying with data processing principles.

Question 28

New Technology and Data Security (CH9)

Who enforces The Data Protection Act?

Answer 28

The Information Commissioner’s Office (ICO).

There is a statutory requirement for every organisation that processes personal information to register with the ICO.

Question 29

New Technology and Data Security (CH9)

What are the Penalties for Failing to Comply with the Data Protection Act or the EU General Data Protection Regulations (GDPR) ?

Answer 29

• Maximum fines: greater of 20m Euros or 4% of the organisation’s annual turnover. This applies to UK businesses if they process personal data of EU resident.
• In the UK the maximum fine for breaches in the processing of UK residents’ personal data is the greater of £17.5 million, or 4% of annual global turnover.

Question 30

New Technology and Data Security (CH9)

Notification to the Information Commissioner’s Office (ICO).

Answer 30

• Notification is the process by which the person controlling the data gives the ICO details about the way in which the company processes data.
• Failure to notify the ICO could result in a fine if convicted.
• If an organisation discovers a personal data breach it must report this breach to the relevant supervisory body within 72 hours of becoming aware of it.

Question 31

New Technology and Data Security (CH9)

What Controls should a business have to maintain Information Security?

Answer 31

- Accounting systems access levels - passwords that only allow authorised employees to access parts of the system.
- Security controls - such as firewalls to protect access from outside the organisation.
- Integrity controls - computer applications have integrity controls to ensure data is accurate and complete.

Question 32

New Technology and Data Security (CH9)

What are the 3 types of Integrity Controls?

Answer 32

- Input controls - provide assurance that transactions are complete and have been properly authorised before they are processed by the system.
- Processing controls - ensure data that is entered into the system is processed properly.
- Output controls - designed to ensure the integrity of the data that is output from the system.

Question 33

New Technology and Data Security (CH9)

What is a Cyber Attack?

Answer 33

A cyberattack is a malicious and deliberate attempt by someone outside the organisation to access its information system.

Question 34

New Technology and Data Security (CH9)

What are the 3 main Cybersecurity Measures?

Answer 34

• Firewalls - A barrier between a business’s internal network and the public internet.
• Antivirus software - Protects against virus attacks by scanning, detecting and deleting viruses from a system.
• Data encryption - Translates data into another form, or code, so that only authorised users with a ‘decryption key’, or password, can read it.