chapter 16 general ledger and reporting system copyright © 2012 pearson education, inc. publishing...

Chapter 16

General Ledger and Reporting System

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 16-1

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 such as responsibility accounting, balanced scorecards, and graphs can be used to provide information managers need to effectively monitor performance.


General Ledger and Reporting


General Ledger and Reporting

Primary function is to collect and organize The accounting cycle activities Financing activities Investing activities Budget activities Adjustments


General Ledger and Reporting General Threats

Inaccurate or invalid general ledger data

Unauthorized disclosure of financial statement

Loss or destruction of data


General Ledger and Reporting General Controls

Data processing integrity controls

Restriction of access to general ledger

Review of all changes to general ledger data

Access controls

Encryption

Backup and disaster recovery procedures


General Ledger and Reporting Activities

1. Update general ledger

2. Post adjusting entries

3. Prepare financial statements

4. Produce management reports


Update General Ledger

Posting journal entries from: Accounting subsystems

Updated automatically by each of the transaction cycles in chapters 12-15

Treasurer Nonroutine transactions such as issuance or retirement

of debt, purchase or sale of investment securities, or acquisition of treasury stock

Journal voucher file

Trial balance

Audit trail

Copyright 2012 © Pearson Education, Inc. publishing as Prentice Hall 16-8

Update General Ledger Threats

Inaccurate updating of general ledger

Unauthorized journal entries


Update General Ledger Controls

Data entry processing integrity controls

Reconciliations and control reports

Audit trail creation and review

Access controls




Post Adjusting Entries

Accruals Events that have occurred but no exchange of cash e.g., interest revenue earned, wages payable

Deferrals Reflect exchange of cash prior to performance of event e.g., prepaid revenue, prepaid expenses

Estimates Portion of expense expected to occur over a period of

time e.g., depreciation, bad-debt expense

16-11

Post Adjusting Entries

Revaluations Reflect differences between actual and book values of

assets or changes in accounting principles e.g., inventory adjustments, change in inventory valuation

method

Corrections Correct effects of errors


Post Adjusting Entries Threats

Inaccurate adjusting entries

Unauthorized adjusting entries


Post Adjusting Entries Controls

Data entry processing integrity controls

Spreadsheet error protection controls

Standard adjusting entries



Access controls


Prepare Financial Statements

Closing journal entries

Income statement

Balance sheet

Statement of cash flows


Prepare Financial Statement Threats

Inaccurate financial statements

Fraudulent financial reporting


Prepare Financial Statement Controls

Processing integrity controls

Use of packaged software

Training and experience in applying IFRS and XBRL

Audits


eXtensible Business Reporting Language (XBRL)

Without With


XBRL

Instance Document Contains data from financial statements

Marked up or tagged with data describing the data Each piece of data in XBRL is an element

Taxonomy Set of files defining the various elements and the

relationships between them A schema Contains the definitions of every element that could

appear in an instance document


XBRL

Linkbases Describes relationships between elements

Reference Identifies relevant authoritative pronouncements

Calculation Specifies how to combine elements

Presentation How to group elements

Label Associates human-readable labels with elements


Produce Management Reports Threats

Poorly designed reports and graphs


Produce Management Report Controls

Responsibility accounting

Balanced scorecard

Training on proper graph design


Balanced Scorecard

A report that provides a multidimensional perspective of organizational performance Reflecting four perspectives of the organization

Financial Customer Internal operations Innovation and learning

Showing goals and measures Targets Actual


chapter 16 general ledger and reporting system copyright © 2012 pearson education, inc. publishing...

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