Information system in accounting and finance. Accounting, Finance,SPSS

COVID -19 Solution Limited (CVS LTD) Case Study
Name
Information System in Accounting and Finance
Date
Part 1 - A CASE STUDY(a) Physical internal control weaknesses in the CVD Ltd systems and possible solutions.
The six categories of the physical internal control are
* Transaction authorization
* Segregation of duties
* Supervision
* Accounting Records
* Access Controls
* Independent verification (Hall, 2018)
Internal controls are the measures that the management adopts to provide reasonable assurance that there is prevention, detection and correction of unauthorised and unnecessary activities. The human activities that influence the controls in accounting systems, primarily focus on the people and how they carry out the tasks.
The purchasing agent selects the vendor and creates digital purchase orders in the purchase order, but there is no mention of an approved vendor list and checking this. There may be a problem as the agent may choose the wrong vendor, price, poor quality goods, and services and at other times there is a risk of late delivery. Another issue in the purchasing department is that there is no information on numbering the purchase orders and authorisation of big purchases.
Thus, there is a need to keep an approved vendor list that is checked by another person, while also numbering the purchase order and authorization purchase of large items. This ensures that the purchasing agent does not receive kickbacks and favour vendors that offer inferior goods at high prices.
While the accounts payable clerk reconciles the purchase order and the receiving report, there is no information on receipt of the goods from the end-users. The clerk needs to ensure that the receiving report had adequate information on receipt of goods, which tallies with the end-users. Additionally, it is necessary to check for any extensions on invoices.
Other Controls
Transaction authorization
* There is a risk of unauthorised acquisition of goods right from purchasing and there is a need for approved requisition.
* Purchases should only be made from approved vendors.
Segregation of duties
* In different stages of the accounting process and transactions having different individuals minimize errors and opportunities for fraud as no one person initiates, records, authorizes and reconcile a transaction.
* Complete separation of receiving and purchasing transactions taking into account the necessary coordination.
Supervision
* Establish a span of control where there is a manager who supervises competent and trustworthy personnel (Johnstone, Gramling and Rittenberg, 2018).
Accounting Records
* Review the purchase ledger control account and reconcile with the bank
* Accounts payable clerk prints the check/cheque and sends it to the vendor, but there is a need to verify the invoices and tracking purchase orders.
Access Controls
* Limiting access to accounting records other than the automated records including the purchase orders, journal, ledger, and control accounts.
Independent verification
* Reconciliation accounts and ensuring there is accuracy and completeness.
(b) Data flow diagram of the Expenditure processing cycle and cash disbursement cycle.
Warehouse DepartmentReceiving DepartmentPurchasing DepartmentAccounts Payable Department
Vendor
Accounts payable Vendor General ledgerCheck-hard copy Check items and select vendors Create digital POCreate digital POVendor Vendor Close POPacking slipDigital POCheck inventory levels Close cash disbursement voucher recordPayment in digital check register General ledgerAP control account Digital cash disbursement voucher recordPOGeneral ledgerInventory control account Rec reportDigital Receiving reportRec reportRec reportInventoryInvoice
(c) Describe IT control systems that should be in place in this system. Your answer shouldfocus on (a) Input control (b) process control and (c) output control
IT control systems are included in the applications of the information systems, which are automated or partially automated. In an information system, one must take into account the input, process and control activities that must be carried out to produce the information that the company requires for decision-making and control of operations. In each of these activities, there controls those are the parameters for the audit.
* Input control
Electronic data processing transactions mostly begin with data entry procedures. Each transaction to be processed must be received and recorded accurately and in its entirety, only valid and authorized data must be processed and the data must be entered once for each transaction.
Input controls are preventive and they minimise the risk of improper adjustments to a transaction. Thus, there must be audit trail (log) details that identify the user name, date and time, field value, and where the transaction was made. This helps to check the critical data and information that is captured or modified. Additionally, as the data is entered, the system must compare with the records of the master files to determine the validity of the data entered. In the event of an inconsistency, the system must notify the user immediately so that it can be corrected.
Verifying that the application's log is reviewed by those responsible for investigating unauthorized access and manipulation is necessary to improve accuracy of the records. Control is further strengthened by limiting who can make changes in the master files when authorized. The system must ensure there is continuity of activities related to the approved transactions through alternative data entry routes.
* Process control
The process controls ensure that the valid input data in the automated process is complete, accurate, and authorised. Thus, one of the most important controls is the automated file identification and validation where the files are complete (Turner, Weickgenannt and Copeland, 2017). This affects who can create, access and modify the data and information before processing.
* Verification of the calculated amounts is another feature since the automated functionalities allow the system to make calculations from different inputs and master files.
* Automated tracking of the changes provide evidence on audit trails, which is helpful in reasonableness verification. This includes comparing individual transactions to avoid duplicates and focus on cross-checking details.
* Data extraction and reporting to ensure the reasonableness and completeness of transactions.
* Automated functionality of aging processing.
(c) Output control
The output control focuses on what is done with the data after processing to ensure the data is complete and accurate, as well as distribute the data and information.
* Reports are one form of output, and there is distribution control to maintain the confidentiality of information in the reports
* Stopping errors, correction is verified and re-enter the data into the systems ensures that there is accuracy and outputs are accurate and complete.
* Reconciliation of total amounts in the outputs with the respective total amounts of input data. There is verification whether the existence of audit trails in the system design will allow tracing the processing of transactions in the absence of balancing.
Part 2- COVID-19 and Transaction Processing Systems
(a) Expenditure and revenue processing cycle of the company.
Expenditure, conversion, and revenue cycles are the primary transaction cycles of the transaction processing systems (TPS). The expenditure cycle consists of all the steps in purchasing materials from the suppliers, property and labour beginning with purchasing to cash disbursements, where payment is last in this part of the cycle (Hall, 2018). Additionally, the expenditure cycle includes the purchases/accounts payable system cash and disbursement procedures and payroll and fixed asset systems. The revenue cycle relates to the accounting transactions that are recorded in revenue generation from the outputs of conversion when there are purchasing to the cash disbursements (Turner, Weickgenannt and Copeland, 2017). The revenue cycle begins from the moment the product is finished and in the warehouse as a tradable asset but can start much earlier when it comes to production on-dema...