Holy Cross of Davao College

Accounting Information System Requirement

Daniella Beige Dagohoy
Febuary 13, 2018
Chapter 1

Requirements:

a. Describe the role that each of the following areas has in the establishment,
maintenance, and evaluation of internal control:

 Management- the role of the management operates through functions

such as planning, organizing, staffing, leading/directing,
controlling/monitoring, and motivation.
 External auditor- responsible for providing an independent opinion on the
integrity of an entity's financial statement.
 Internal Auditors- To provide independent assurance that an
organization's risk management governance and internal control
processes are operating

b. To whom should the Director of Internal Audits report? Explain your

answer.
Senior Management- concerned with both consultative advice and assurance
regarding risk and control.
Operational Management- concerned with the consultative help regarding the
efficiency of operations and adequacy of control mechanisms.
Audit Committee- are primarily interested in assurance services regarding risk
and control.

c. Comment on the audit committee member's perspective as to the

committee current composition.

The audit committee must be willing to challenge the internal auditors as well
as management, when necessary.The committee should consist of people
who outsiders not associated with the families of executive management nor
former officers, and at least one member of the audit committee must be a
“financial expert.”
Chapter 3

Requirement: for each of the three control categories listed, provide two
specific controls and explain how each contributes to ensuring the reliability of
data.

INPUT CONTROL
 RANGE CHECK- this control can examine the pay rate field of all payroll
records to ensure that they fall within this range.
 MISSING DATA CHECK- this edit identifies blank or incomplete input
fields that should contain data that are required to process the transaction.

PROCESSING CONTROL
 BATCH CONTROL- used to manage the flow of high volumes of
transactions through batch processing systems. The objective of this is to
reconcile system output with the input originally entered into the system.
 RUN-TO-RUN CONTROLS- use the values in the batch control record to
monitor the batch as it moves from one programmed procedure to another.
This ensures that each run in the system processes the batch correctly
and completely.

OUTPUT CONTROL
 OUTPUT SPOOLING- output devices such as line printers can become
backlogged, this can cause bottleneck and adversely affect system
throughput. To ease this burden, applications are often designed to direct
their output to a magnetic disk file rather than print it directly. This is called
spooling.
 END-USER CONTROL- once in the hands of the user, output reports
should be examined for correctness. errors the users detects should be
reported to the appropriate IT management. such errors may be
symptoms of an improper system design , incorrect procedures, errors
accidentally inserted during system maintenance, or unauthorized access
to data file or program. once a report has served its purpose, it should be
stored in a secure location until its retention period has expired and then it
should be shredded.
Chapter 7
Review Questions

1) A company’s conversion cycle transforms input resources, such as raw

materials, labor, and overhead, into finished products or services for sale.

2) The activities involve in a batch processing system are production

planning and control, materials and operation requirements, production
scheduling, work centers and store keeping and inventory control.

3) The difference between continuous, batch, and made-to-order processing

is that a continuous processing creates a homogeneous product through a
continuous series of standard procedure. Made-to-order processing
involves the fabrication of discrete products in accordance with customer
specifications. Batch processing produces discrete groups or batches of
products. Each item in the batch is similar and requires the same raw
materials and operations.

4) documents that trigger and support batch processing systems are

production schedule, bill of materials, route sheet, work order (or
production order), move ticket, and materials requisition.

5) The RM requirement for a batch of any given product is the difference

between what is needed and what is available in the RM inventory. The
operations requirements for the batch involve the assembly and/or
manufacturing activities that will be applied to the product.

6) The objectives of inventory control is to minimize total inventory cost while

ensuring that adequate inventories exist to meet current demand.

7) The document triggers the beginning of the cost accounting process for a
given production run is when the production planning and control
department sends a copy of the original work order to the cost accounting
department.

8) The documents needed by cost accounting clerks to update the

work-in-process accounts with standard charges are documents reflecting
in materials and labor added through the production process. Inventory
 control sends copies of materials requisitions, excess materials
requisitions, and materials returns. The various work centers send job
tickets and completed move tickets.

9) Types of management reports prepared by the Cost Accounting System:

 Traditional Costing System
 Job Order Costing
 Process Costing
 Activity-Based Costing

10) The receipt of the last move ticket for a particular batch signals the
completion of the production process and the transfer of products from
WIP to the FG inventory.

11) Inventory control maintains accounting records for RM and FG inventories.

The cost accounting function accounts for WIP and should be separate
from the work centers in the production process. Lastly, the GL
department must be separate from other accounting functions.

12) Example of Transaction Authorization: The checker might review

transactions to determine if the transaction will increase the credit limit to
an acceptable level or decrease the payment to an unacceptable level.
Example of Segregation of duties: One person opens envelopes
containing checks, and another person records the checks in the
accounting system
Example of Access Control: Building Access- permits the right permission
to authorize user by using ID card or access card.

13) Computer-Aided Design system increases engineers’ productivity,

improve accuracy by automating repetitive design tasks, and allow firms
to be more responsive to market demands.
Computer-Aided Manufacturing focuses on the shop floor and the control
of the physical manufacturing process.

14) It means that because of setup cost constraints, firms tend to overproduce
inventories in large batches to absorb the allocated costs and create the
image improved efficiency. The true cost of this dysfunctional activity is
hidden in the excess’ inventories.
 15) The goal of lean production is improved efficiency and effectiveness in
every area, including product design, supplier interaction, factory
operations employee management, and customer relations.

16) Activities describes the work performed in a firm, while Cost objects are
the reasons for performing activities.

17) Essential activities add value; nonessential activities do not, and

should be eliminated.

18) Islands of technology describes an environment in which modern

automation exists in he form of islands that stand alone within the
traditional setting. The islands employ computer numerical controlled
machines that can perform multiple operations with little human
involvement.

19) Computer-integrated manufacturing is a completely automated

environment with the objective of eliminating non-value -added activities.

20) Value stream includes all steps in the process that are essential to
producing a product.

Chapter 8

Problem 8: Organizational Chart

CHAIRMAN

PRESIDENT

HCDC Learning VPAA Director, student

Reserve Center life and services

Academic
Quality
Registrar Student Guidance
Assurance NSTP
Affairs
Officer
Coordinator
 Problem 9: Decision Level

Strategic Planning Tactical Planning Managerial Control Operational Control

Expanding a product Examining whether Examining whether Determining the mix of
line overseas personnel employee’s attitudes products to
development cost are improving manufacture this year
is rising

Determining the best Examining whether the

distribution route number of defective
goods manufactured is
within a certain range

Closing a plant Examining whether the

cost of raw materials is
within a certain range

Building a new plant Employing more

facility automated
manufacturing this year

Examining whether the

amount of scrap
material is acceptable

Examining whether
production levels are
within a predicted
range

Making purchasing
arrangements with a
new supplier

Increasing production
capabilities this year by
purchasing a more
efficient piece of
machinery
Insights:

An information system is a formal process for collecting data, processing the

data into information, and distributing that information to users. The purpose
of an accounting information system (AIS) is to collect, store, and process
financial and accounting data and produce informational reports that
managers or other interested parties can use to make business decisions.
Although an AIS can be a manual system, today most accounting information
systems are computer-based.

I learned that accounting information system helps business owners to create

budgets for their company. Accounting information provides business owners
with detailed analysis of how their entities spent on business transactions and
functions. With this information they have,they use it to develop future budgets.
It also helps on developing business decisions, such as expanding current
operations, using different economic resources, purchasing new equipment or
facilities, estimating future sales or reviewing new business opportunities. And
also, accounting information provides owners information about the cost of
various resources or business operations and helps business owners
understand how current business operations will be affected when expanding
or growing their businesses.
This is also used in investment decisions because external stakeholders use
accounting information in order for them to decide if they will invest in your
company or not. Banks, lenders, venture capitalists or private investors often
review a company’s accounting information to review its financial health and
operational profitability or if the company is worth it for their investment.

Through this subject I understand more about the standard of an internal

control system. I’ve learned that through internal control, it can help you
choose the extent of internal control that is correct for your business.
One of the internal control procedure of accounting is a segregation of duties,
where one employee or department collects cash and another records the
receiving of inventories or goods purchased by the company. It should not be
one department doing most of the business transactions for the purpose of
internal control. Or in other words,segregation of duties involves splitting
responsibility for bookkeeping, deposits, reporting and auditing.
Also, controlling access to different parts of an accounting system via
passwords, lockouts and electronic access logs can keep unauthorized users
out of the system while providing a way to audit the usage of the system to
identify the source of errors or discrepancies.
The approval authorization of and requiring specific managers to perform
certain business transactions is needed to prevent unscrupulous employees
from making large fraudulent transactions with company funds. Business
transactions should be prove that transactions have been seen, analyzed and
approved by appropriate authorities.
Periodic reconciling is also one procedure of internal control, it can ensure that
balances in your accounting system match up with balances in accounts held
by other entities, including banks, suppliers and credit customers.
Differences between these types of complementary accounts can reveal
errors or discrepancies in your own accounts, or the errors may originate with
the other entities. So it’s best to keep internal control especially if a business is
big because it would require tough management to avoid discrepancies and
frauds.