ACC321 Exam 2 Flashcards
Expenditure cycle
A recurring set of business activites and related information processing operations associated with the purchase of and payment for goods and services
Objectives of the expenditure cycle
Tracking purchases of goods and or services from vendors, tracking amounts owed, maintaining vendor records, controlling inventory, making timely and accurate vendor payments, forecasting purchases and cash outflows
Included in the expenditure cycle
Request goods, order goods, recieve goods, approve invoices, pay for goods, returns
Purchase requisition
Documents the need to purchase goods for supplies. What how when to purchase, not whi
Request goods opportunites for using info tech
Electronic purchase requition, automatic reordering
Purchase order
Formally request a vendor to sell and deliver specified products at specified prices also a promise to pay
Order goods opportunites for using info tech
Electronic data interchage to reduce costs, linking edi to point of sales, vendor managed inventory, on line ordering
Order goods threats and controls
Stockouts/excess inventory, ordering unnecessary items, purchasing goods at inflated prices, purching bad quality, purchasing from unautorized suppliers, kickbacks
Receiving report
Documents the details of each delivery
Recieve goods IT
Bar coding, rfid, gps locating of shipments
Recieve goods threats/controls
Recieving unordered goods, errors in counting recieved foods, stealing inventory
Disbursements voucher
Summarizes the info in a set of vendor invoices-authorized payment
Risk and controls cash disbursement process
Authorization of transactions, segregation of duties, three way match, business process reengineering
Three way match
Matching of a purchase order to the related recieving report and invoice
Business process reengineering
Computer based matching and checking of purchasing documents
Approve invoices IT
Edi invoicing, matching edi invoice to computer supporting documents, eliminating invoices entirely, procurment cards and company cards
Pay for goods IT
Electronic funds transfer for paying vendors
Approve/pay threats and control
Failing to catch errors in invoice, paying for goods not recieved, failing to take available discounts, pauong the same invoice twice, recording and posting errors in ap, misappropriation of moneh
Outputs of the purchasing process
Financial statement info, vendor checks, check register
Continuous processing
Creates a homogeneous product through a continuous series of standard procedures
Batch processing
Produce descrete groups of products. Each item in the batch is similar
Make to order processing
Involves the fabrication of discrete products in accordance with customer specifications
The production cycle
A recurring set of business activites and related info processing operaions associatd with convering raw inputs to outputs
Production cycle includes
Product design, planning and scheduling, production operations, cost accounting
Product design
Determing how to make a product
Bill of materials
Specifies the materials needed to make the product. Contains part number, raw material number, quantity
Operations list
Specifies the machine and labor requirements needed to make the product also call routing sheet
Product design threats
Poor product design resulting in excess costs
Product design controls
Accountig analysis of cost arising from product design choices, analysis of warranty and repair costs
Push planning
Build to inventory and try to sell
Pull planning (lean)
Build based on customer order
Master production schedule
Uses info about orderrs forcast and inventory levels to schedule production
Production order
Authorizes the manufacture of a specific quantity of a specific product
Planning and scheduling threats
Over or underproduction
Planning and scheduling controls
Production planning systems, review and approval of production schedules and orders, restriction of access to prodiction orders and prodiction schedules
Production operations threats
Theft of inventory, theft of fixed assets, poor performance, loss of inventory/assets to disaster, disruption of operations
Cost accounting
Providing info for planning controling evauation of production operations provide accurate cost dats about products for use in pricing and product mix decisions
Cost accounting systems
Records the financial transactions of the events occuring in thr production process, initiated bu the production order, create a new cost record for the new batch and trigger wip, records are updated as material useds, receipt of last move ticket signals completions
Whats wrong with traditional accounting info
Inaccurate cost allocations, and promoted non lean behavior
Activity based costing
Provides managers with info about activities and cost objects. Assumes that products create a demand for activities and activites cause cost
Advantages abc
More accurate costing of products and services, identifying the most and least profitbale products, accuratly tracking cost, drive continuous imprivements, better market mix, itentify waste
Disadvantages to abc
Time consuming and conflict with lean thinking
4 Vs of analytics
Volume, velocity, variety, veracity
Volume
Data at rest. Existing data to process
Velocity
Data in motion. Streaming data, milliseconds to seconds to respond
Variety
Data in many forms. Structured, unstructured, text, multimedia
Veracity
Data in doubt. Uncertainty due to data inconsistency and incompleteness, ambiguities, latency, deception, model approximations
Types of internet of things
Rfid tags, gps location data, wearable tech, machine sensor data, situatiobal awareness sensor data
Revenue assurance analytics
To reduce leakage from order to cash process. Predicting credit risk, deductions and disputes on trade funds, pricing discounts and terms of trade
Analysis of expenses
To help reduce wastage. Payable analytics, spend analytics, contract compliance
Control analytics
To help enhance. Process and financial risk analytics, financial statement quality, ethical fraud, fraud evidence reviews
Working capital analytics
To help improve cashflow. Logistics inventory, days payables outstanding, days sales outstanding
Continuous monitoring
Payroll, SSN test, setting criteria for percent change from run to run, accounts payable, duplicate payments, unclaimed credits
Continuous auditing
Systems such as approva or those you build yourslef can identify unusual transactions that might avoid a fraudulent payment, look for a series of split transactions, avoiding the dollar cutoff for either no receipt or no approval required
Unsupervised learning
Can be used to model behavior and discover anomalies. When several occur they can be grounds for suspicion
Supervised learning
Can be used to label and classify known exceptions for certain fraud schemes and map these scheme models to new dafs and infer new exceptions
IT auditing objectives
Confidentiality, integrity, availablilitu
Confidentiality
Preserving authorized restrictions on information access and disclosure
Integrity
Gaurding against improper information modification or destruction
Availability
Ensuring timely and reliable access to and use of information
Short term audit planning
What do we need to audit this year
Long term audit planning
What should we plan to audit in the future
Auditing around the computer
The processing portion is ignored
Auditing through the computer
Verification of controls in a computer system. General controls and application controls
Substantive testing
Computer controls are weak or nonexistent. These are detailed tests of transactions and account balances
Compliance testing
Is performed to ensure that the controls are in place and working
Objective one
Overall security
Security errors and fraud include
Accidental or intentional damage to a system, unautorized access disclousure or modification of data and programs, theft, interruption of business activities
Control procedures to minimize security errors and fraud
Developing an info security plan, restricing physical and logical access, encryping, protect against viruses, firewalls
One way to test logical access controls is to
Try to break into a system
Objective 2
Program development and aquisition
Objective 3
Program modification
Objective 2,3 errors and fraud
Errors due to careless programming or misunderstood specifications, deliberate insertion of unauthorized instructions into programs
Objective 2,3 control procedures
Management and user authorization and approval, thorough testing, proper documentation
Source code comparision
Compare the current version of the program with the original source code
Reprocessing
Surprise the auditor uses a verified copy of the source code to reprocess dats and compare
Parallel simulation
Auditor writes own program and compares
Objective 4
Computer processing
Objective 4 errors and fraud
Fail to detect erroneous input, process erroneous input, improperlu distribute or disclose output
Objective 4 compensating controls
Processing of test data, analyzing program logic
Processig test data
Testing a program by procesing hypothetical valid and invalid transactions
Objective 5
Source data
Objective 5 erros and fraud
Inaccurate sorce data and unautorized source data
Input data validation checks
Sequence check, limit check, range check, validity check, completeness check, reasonableness check
Objective 6
Data files
Objectice 6 erros and fraud
Destruction of stored data and unautorized modification or disclousire of stored data
