Transcript General Ledger and Reporting System

General Ledger and Reporting
System
Chapter 16
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Learning Objectives
• Describe the information processing operations required
to update the general ledger and to produce reports for
internal and external users.
• Identify the major threats in general ledger and
reporting activities and evaluate the adequacy of various
control procedures for dealing with them.
• Understand the implications of new IT developments,
such as XBRL, and changes in external reporting
requirements, such as IFRS, for the design and operation
of the general ledger and reporting system.
• Discuss how tools like responsibility accounting,
balanced scorecards, and graphs can be used to provide
information managers need to effectively monitor
performance.
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General Ledger and Reporting System
Process
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Update general ledger
Post adjusting entries
Prepare financial statements
Produce managerial reports
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General Ledger and Reporting System
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Update General Ledger
Threats
Controls
1.
1 a. Data entry processing
integrity controls
b. Reconciliations of accounts
from subsidiary journals to
general ledger accounts
(e.g., Accounts payable)
c. Audit trail
2 a. Access controls
b. Reconciliations and control
reports
c. Audit trail
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Inaccurate updating of
general ledger
2. Unauthorized journal entries
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Adjusting Entries
• Accruals
▫ Made at end of accounting period to reflect events that have
occurred but are not in the financial statements (e.g., wages
payable)
• Deferrals
▫ Made at end of accounting period to reflect exchange of
cash prior to performance of related event (e.g., rent)
• Estimates
▫ Portion of expenses expected to occur over a number of
accounting periods (e.g., depreciation)
• Revaluations
▫ Entries made to reflect differences between actual and
recorded value of an asset or change in accounting principle
• Corrections
▫ Entries made to counteract effects of errors found in the
general ledger
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Post Adjusting Entries
Threats
Controls
1. Inaccurate adjusting entries
2. Unauthorized adjusting
entries
1 a. Data entry processing
integrity controls
b. Spreadsheet error protection
controls
c. Standard adjusting entries
2 a. Access controls
b. Reconciliations and control
reports
c. Audit trail creation and
review
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Prepare Financial Statements
Produce Managerial Reports
Threats
Controls
1.
1 a. Processing integrity controls
b. Use of packaged software
c. Training and audits
2 a. Audits
3 a. Responsibility accounting
b. Balanced scorecard
c. Training on proper graph
design
Inaccurate financial
statements
2. Fraudulent financial
reporting
3. Poorly designed reports and
graphs
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New Standards and Technology That
Affect Financial Reporting
• International Financial Reporting Standards
(IFRS)
▫ Understand the systems implications due to the fact
that the IFRS is different in financial reporting than
Generally Accepted Accounting Principles (GAAP)
• eXtensible Business Reporting Language
(XBRL)
▫ Specifically used for communicating financial data
(required by the Securities and Exchange Commission
(SEC) if public company)
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Evaluating Performance
• Responsibility accounting
▫ Reporting results based upon managerial
responsibilities in an organization
• Flexible budget
▫ Budget formula based upon level of activity (e.g.,
production levels)
• Balanced scorecard
▫ Measures financial and nonfinancial performance
• Graphs
▫ Data visualization and proper graph design
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Key Terms
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Journal voucher file
Trial balance
Audit trail
XBRL
Instance document
Element
Taxonomy
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Schema
Linkbases
Style sheet
Extension taxonomy
Responsibility accounting
Flexible budget
Balanced scorecard
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