Chapter 16 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 p ID: 616755
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General Ledger and Reporting System
Chapter 16
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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 like responsibility accounting, balanced scorecards, and graphs can be used to provide information managers need to effectively monitor performance.
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General Ledger and Reporting System Process
Update general ledger
Post adjusting entries
Prepare financial statements
Produce managerial reports16-3Slide4
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 of accounts
from subsidiary journals to
general ledger accounts
(e.g., Accounts payable)
c. Audit trail
2 a. Access controls
b. Reconciliations and control
reports
c. Audit trail
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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)EstimatesPortion 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
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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
2 a. Access controls
b. Reconciliations and control
reports
c. Audit trail creation and
review
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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 audits
2 a. Audits
3 a. Responsibility accounting
b. Balanced scorecard
c. Training on proper graph
design
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New Standards and Technology 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)16-9Slide10
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 scorecardMeasures financial and nonfinancial performanceGraphsData visualization and proper graph design16-10Slide11
Key Terms
Journal voucher fileTrial balance
Audit trail
XBRL
Instance documentElementTaxonomySchemaLinkbasesStyle sheetExtension taxonomyResponsibility accountingFlexible budgetBalanced scorecard
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