Chapter 7: The Impact of Technology on Financial Control

Question 1

what is the role of the financial control department?

Answer 1

responsible for managing the financial resources of a securities industry firm

Question 2

what is management accounting within the FCD?

Answer 2

produces the profit and loss (P&L) accounts and balance sheets for individual business units and their underlying products.

Question 3

what is Statutory reporting within the FCD?

Answer 3

produces the firm’s balance sheet and P&L account, which is then subject to both internal and external audit

Question 4

what are the sub-departments of the FCD?

Answer 4

• regulatory reporting section produces the financial and statistical returns demanded by the firm’s regulator
• tax management section is responsible for organizing the firm’s activities so that its tax liabilities are legally minimized
• accounts payable/receivable makes payments for costs such as suppliers’ invoices and staff expenses

Question 5

what are the technology implications of the FCD?

Answer 5

FCD has its own dedicated technology applications which include a
corporate general ledger system, an expense allocation system, and a
regulatory accounting system.

Question 6

what is the main settlement system responsible for?

Answer 6

• receiving trade details,
• sending trade confirmations,
• reporting to regulators,
• sending settlement instructions,
• managing positions for bonds, equities, and currencies,
• processing changes to positions,
• forwarding details to the reconciliation system, and
• updating the general ledger and regulatory accounting system with relevant information

Question 7

what impacts does the main settlement system have?

Answer 7

has a significant impact on the accuracy of money values posted to the general ledger because of its wide range of function

Question 8

what impacts the accuracy of what is reported to the general ledger from the settlements system?

Answer 8

inaccurate reference data, corporate action processing problems, system limitations, human errors, and problems with receiving data from trade capture systems and external agents

problems with the interface between the systems

Question 9

what is the development impact of the general ledger?

Answer 9

all systems in the configuration must be continually enhanced to deal with innovations in the structure of the products that are traded by the firm

Question 10

what is the general ledger?

Answer 10

main accounting record of a business which uses the double-entry bookkeeping convention

Question 11

what is the Double-Entry Principle?

Answer 11

based on the idea that each transaction is recorded in at least two ledger accounts. ensures accuracy and quick checking of accounts

Question 12

what is posting (within the general ledger)?

Answer 12

recording amounts as credits (right side) and as debits (left side) on the pages of the general ledger

Question 13

what is a trail balance?

Answer 13

listing of the account names and the sum of the account balances

Question 14

what is the accounting equation?

Answer 14

Assets = Liabilities + Shareholders’ Equity

Question 15

what should a general ledger account in a technology system include?

Answer 15

reference data items, balance information items, Transaction information items

Question 16

what is a position?

Answer 16

position that the firm holds in a particular equity is the net result of posting the money values of all the purchases of that equity, less the money values of any sales

Question 17

what are Long positions, debit balances and assets?

Answer 17

A long position is when a firm purchases more shares than it sells, resulting in a debit balance in the general ledger and an asset to the business

Question 18

what is a Short positions, credit balances and liabilities?

Answer 18

A short position is when a firm purchases fewer shares than it sells, resulting in a credit balance in the general ledger and a liability to the business

Question 19

what is the stock record?

Answer 19

used by firms to record stock quantities and balances using the double-entry bookkeeping convention. This is similar to how the general ledger is used to record cash transactions and balances