IT and Accounting

Question: Discuss about theIT and Accounting. Answer: The need to document an Information system Below are the reasons as to why Information Systems in Accounting are documented: To create an environment of accountability among employees for designated tasks and responsibilities (GWI, 2012). To help enable the evaluation of the performance of the system personnel. To help identify and appreciate the validity and strengths of the existing system as well as to develop ways of eradicating its weaknesses (Lord, 2016). To provide reference information to auditors. To regulate the cost incurred in system development and maintenance. To exhibit how the system works. How storing the same fact in different computer files can potentially affect the integrity of data? Data integrity is critical because it defines the usability of that information in its lifecycle (Lord, 2016). Storing the same fact data in different computer files can affect data integrity in the following ways: It makes it difficult to know which data is updated since when one updates information on one file it will not update all the other in files automatically. It makes data accessibility harder. That is, only the data owner is authorised to make changes. Other users are prohibited from compromising the data (Lord, 2016). It poses a threat to data security: Storing same fact information in different computer files create a loophole to be used by unauthorized users to access data (Lord, 2016). What Function with the IT organization should be segregated? Indeed the segregation of duties (SoD) plays an important role in risk assessment and audit (Singleton, 2012). Therefore there should be segregation of: IT duties from user Department. Database Administrator from the rest of IT functions. Applications development from database and other IT operations New application developments from Applications maintenance Information security from other IT functions Approaches to implementing a new ERP System There are two approaches that can be used to implement a new ERP System Enterprise-wide Full Installation The approach was often used in the early days of installing ERP. One should ensure a smoother transition through stating the ways through which the new ERP software will differ from the existing software regarding improvements (Marchello, 2016). Employees should be adequately trained for them to be comfortable with the new ERP Software (Marchello, 2016). Unit by Unit It is common in large companies with few and simple processes across units. In this approach, the management identifies a liberal and flexible group and installs a pilot ERP installation in the department (Marchello, 2016). When the company feels satisfied with the pilot installation, it is used as a reference to selling other units on ERP (Marchello, 2016). Disaster Recovery Plan It is a documented process used to recover and protect an entity's business IT infrastructure in case of a disaster. The pal outlines the procedures an organization is to follow during a disaster (Kirvan, 2012). The features of DRP are: Secure data storage Regular data backups Offsite locations Service redundancy Success Planning Employee preparation Section 2 How does EDI improve the effectiveness and efficiency of the purchases/ cash disbursement cycle? Give an example. Electronic data interchange (EDI) refers to a computer-based exchange application that facilitates the exchange of business documents between companies. Many companies use EDI to improve the efficiency of providing services (Yacht, 2016). EDI has proved to be less costly that handling document between companies manually. It has also eliminated errors that used to occur when documents are handled manually. Lastly, there is a faster flow of transactions between two or more companies (Singleton, 2012). For instance, in the case of purchases and sales transactions, EDI has assured companies effective monitoring of stock levels, effective use of warehouses, lower freight and holding cost, and reduction of out-of-stock instances. Studies have shown that the application of EDI, has improved the speed and efficiency of handling transaction between companies by over 60% (Kirvan, 2012). Explain how a manager can lessen information overload? Give examples. Approximately 62% of managers have admitted that their work has also been compromised by poor management of information i.e. they are unable to sort relevant information when needed. Such managers can do simply their work by controlling information overload. Lessening information overload helps in creating space for important documents and better decision making (Hastie, 2008). There are three key ways of lessening information overload namely; Focusing important information only and ignoring the rest. For example, a communication manager receiving over 400 reports weekly can review the reports for a period then only focus on 30 reports considered to be vital in decision making and organizational operations ( Kimball Ross , 2013). Having a standardized method of data collection. For example, Electronic Medical Record system is used in the hospitals to save relevant information collected from customers. Use search tools to obtain the information needed. This the best way of reducing information overload. For example, when a manager wants to obtain information on inventory production in the last financial year, he/ she have to type keywords into the search tool and only the relevant information will be extracted (Ghasemi, Barvayeh, Aslani, 2011). Discuss the purpose of a data warehouse? The main reason why data warehouse is used in business or companies is to execute business needs that cannot be fulfilled using a transaction system. First, with data warehouse, a manager can separate the data obtained from production activities from the data obtained from non-production activities. Second, data warehouse allows integration of data by connecting segregated data into one pool. Third, a data warehouse is used as a fundamental tool to support decision making in an organization (Marchello, 2016). What are audit trials? Explain the three security objectives of audit trials? Audit trial is an accounting term that refers to sequences of paperwork meant to either validate or invalidate. Conversely, in computing, audit trial is defined as a paper or electronic log used in tracking computer activity. For example, an illegal attempt by an employee to log in a secured computer by typing a wrong password would be recorded in the audit trial. Both in accounting or computing, audit trial is used to enhance security (Ghasemi, Barvayeh, Aslani, 2011). Three security objectives of audit tests are; First, detecting any authorized attempt by intruders to access a given system. Detecting and denial to aces help to protect transactions involves millions executed by organizations Second, audit trial helps to facilitate reconstruction of events from different sources to establish any attempts made to either corrupt the system or execute a fraud. Third, audit trial promotes personal accountability. For example, if an employ comprises the system for personal gain, audit trial can be used to trace his actions and make him pay ( Kimball Ross , 2013). Explain what an ERP application is and why it is used? List the core applications of an ERP? Enterprise resource planning (ERP) is a management software applied by business to manage/ coordinate their activities. ERP comprises of functions such as development, planning, sales, marketing, stock, management, and planning (Hollander, Denna, Cherrington, 2009). The primary goal of an ERP software is to facilitate data-driven decision making in an organization. ERP is applied in collecting and organizing data to provide an insightful analysis of the business' performance indicators (Hastie, 2008). The key areas where ERP is applied in the business context are; Supply chain Inventory Purchasing Finance department Product lifecycle Human resource And, project management Section 3 Revenue Cycle Fundamental tasks performed in a revenue cycle A revenue cycle involves a set of procedures that happen between the periods a business gets materials to make a sale and the period the transaction is completed (Hangland, 2016). Its primary tasks are; Invoicing and updating accounts receivable Collecting money from customers. Documenting customers order and shipping the required merchandise Take customers order, check credit, inventory and respond to customer inquiries. Sales return Risks associated with the tasks There may be a loss of audit trial causing complications in the computer- related functions of the business (Pallardy, 2015). It 's hard for users to stay up-to-date because of the complexity of the computer technology. Increased chances of collision between different tasks taking place simultaneously (Hangland, 2016). There is little or no human intervention hence it was difficult to troubleshoot if the cycle fails unless a professional is called (Pallardy, 2015). Controlling the risks Seek the services of auditors who to first assess the inherent risks associated with the revenue cycle and conduct tests to determine that the cycle is free of errors (Hangland, 2016). The organization should carry out substantive tests to help find any error in misstatements in the accounts or documentation in the revenue cycle (Pallardy, 2015). Involvement in testing a system in the revenue cycle Being involved in testing the system enables me to know my role in the Revenue Cycle hence I can openly participate in the communication between different departments in the business (Hangland, 2016). This ensures that I have done my job well adding to the general productivity of the company in general. As the manager of an accounts receivable department, I would test for the following areas: Billing Check audit Sales return Invoices Apart from being directly related to my job description, conducting an analysis in the areas as mentioned above will ensure that I am well equipped to monitor accounts, both debit, and credit, hence ensuring that the department is running effectively (Hangland, 2016). Discuss why you should be involved in testing the systems and what areas you would test and why? Before the department starts to use a new revenue cycle system it would be important to involve departmental employees and me (as the manager) in its testing to determine two issues (Hangland, 2016). First, if the system is error free. And second, establish the inherent risks associated with it. Therefore, an auditor should be involved in conducting both the tests of controls and substantive tests to ensure that the new system supports the departmental activities. The manager should be ensured that the new system will not misstate consignment sales, return rights, refunds, and costs of sales, expenses and gross sales among other items. The test of controls will ensure that the new system would observe the accounting principles and ethics when recording sales transactions. Conversely, the substantive tests will involve a trial period where the system is observed closely to ensure that its free from misstatement and errors in the documentation of the revenue cycle transactions (Ghasemi, Barvayeh, Aslani, 2011). References Kimball, R., Ross , M. (2013). The Data Warehouse Toolkit: The Definitive Guide to Dimensional Modeling. New Jersey: Wiley. Ghasemi, M., Barvayeh, E., Aslani, M. (2011). The impact of Information Technology (IT) on modern accounting systems. World Conference on Educational Technology Researches . GWI. (2012, April 5). Top 8 Components of a Disaster Recovery Plan for Business. Retrieved October 8, 2016, from GWI: https://www.gwi.net Hangland, M. (2016, October 6). Finance, Revenue Cycle. Retrieved October 8, 2016, from Healthcare informatics: https://www.healthcares-information.com Hastie, T. (2008). The Elements of Statistical Learning: Data Mining, Inference, and Prediction. New York: : Springer. Hollander, A., Denna, E., Cherrington, O. J. (2009). Accounting, Information Technology, and Business Solutions. New Jersey: McGraw-Hill/Irwin. Kirvan, P. (2012, December 2). IT disaster recovery (DR) Plan . Retrieved October 8, 2016, from Dissater Recovery: https://www.e-janco.com Kroenke, D. M., Auer, D. J. (2014). Database Concepts. New Jersey: Pearson. Lord, N. (2016, October 6). What is Data Intergrity? Data Protection 101. Retrieved October 2016, 2016, from Digital Guardian: https://www.digitalguardian.com Marchello, R. (2016, January 5). Do you Approach a new ERP System Implementation as an Opportunity for overall process redesign. Retrieved October 8, 2016, from Linkedin: https://www.linkedin.com Pallardy, C. (2015, March 25). 5 thoughts on revenue Cycle Management. Retrieved October 8, 2016, from Hospital CFO: https://www.com Singleton, T. (2012, September 10). What Every IT Auditor Should Know About Proper Segregation of Incompatible IT Activities. Retrieved October 8, 2016, from ISACA: https://www.isaca.org Yacht, C. (2016). Compter Acconting with sage 50 2016. New York: McGraw-Hill Education.