Accounting Essay 2 pages must answer all questions
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romney_ais14_stppt_16.pptxAccounting Information Systems
Fourteenth Edition
Chapter 16
General Ledger and Reporting System
Copyright © 2018 Pearson Education, Inc. All Rights Reserved
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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Learning Objectives
Describe the activities, information needs, and key decisions made in the general ledger and reporting system, explain the general threats in the cycle, and describe the controls that can be used to mitigate those threats.
Explain the process for updating the general ledger, the threats to that process, and the controls that can be used to mitigate those threats.
Explain the purpose and nature of posting adjusting entries, the threats to that process, and the controls that can be used to mitigate those threats.
Explain the process of preparing financial statements, the threats to that process, the controls that can be used to mitigate those threats, and how IT developments such as XBRL can improve the efficiency and effectiveness of preparing financial statements.
Describe the process for producing various managerial reports, the threats to that process, and how tools like responsibility accounting, the balanced scorecard, and well-designed graphs can help mitigate those threats.
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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General Ledger and Reporting System Process
Update general ledger
Post adjusting entries
Prepare financial statements
Produce managerial reports
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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General Threats Throughout the General Ledger and Reporting Cycle
Threats
Controls
Inaccurate or invalid general ledger data
Unauthorized disclosure of financial statement
Loss or destruction of data
1 a. Data processing integrity
controls
b. Restriction of access to G/L
c. Review of all changes to G/L
data
2 a. Access controls
b. Encryption
3 a. Backup and disaster recovery
procedures
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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Update General Ledger
Threats
Controls
Inaccurate updating of general ledger
Unauthorized journal entries
1 a. Data entry processing
integrity controls
b. Reconciliations and control
reports
c. Audit trail creation and review
2 a. Access controls
b. Reconciliations and control
reports
c. Audit trail creation and review
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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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
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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Post Adjusting Entries
Threats
Controls
Inaccurate adjusting entries
Unauthorized adjusting entries
1 a. Data entry processing
integrity controls
b. Spreadsheet error protection
controls
c. Standard adjusting entries
d. Reconciliations and control
reports
e. Audit trail creation and review
2 a. Access controls
b. Reconciliations and control
reports
c. Audit trail creation and review
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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Prepare Financial Statements Produce Managerial Reports
Threats
Controls
Inaccurate financial statements
Fraudulent financial reporting
Poorly designed reports and graphs
1 a. Processing integrity controls
b. Use of packaged software
c. Training and experience in
applying IFRS and XBRL
d. Audits
2 a. Audits
3 a. Responsibility accounting
b. Balanced scorecard
c. Training on proper graph
design
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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Regulatory & Technological Developments 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)
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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Managerial Reports & 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 using four dimensional goals:
Financial
Customer
Internal Operations
Innovation and Learning
Graphs
Data visualization and proper graph design
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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Key Terms
Journal voucher file
Trial balance
Audit trail
XBRL
Instance document
Element
Taxonomy
Schema
Linkbases
Style sheet
Extension taxonomy
Responsibility accounting
Flexible budget
Balanced scorecard
Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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Copyright © 2018 Pearson Education, Inc.
Chapter 16: General Ledger and Reporting System
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