Summary of The Revenue Cycle.

By -

Summary

This chapter examined conceptually the revenue cycle of a typical merchandising firm and focused on the following areas:

(1) the functional areas and the flow of transaction information that triggers key tasks; (2) the documents, journals, and accounts that support audit trails, decision making, and financial reporting; and (3) the exposure to risks in the revenue cycle and the control techniques that reduce them.

The chapter examined the operational and control implications of different degrees of technology. First, we examined the manual system depicting people, organizational units, and physical documents and files. The purpose of this was to help the reader envision the segregation of duties and independent verifications, which are essential to effective internal control regardless of the technology in place. In the process, we high- lighted inefficiencies intrinsic to manual systems, which gave rise to modern systems using improved technologies and techniques.

Next we examined automated data processing techniques. Even though these systems improve record-keeping efficiency and effectiveness, they do little to advance an organization’s business strategy. We then examined reengineered systems. This involves rethinking traditional business approaches to

achieve competitive advantage by improving operational effectiveness. We then turned to control issues in the digital environment and found that computer processing consolidates many tasks, thus removing some traditional segregation of duties. The integrity of the computer programs that now per- form these tasks becomes a matter of great concern to the organization. Similarly, organization management must control access to digital accounting files and ensure that adequate backup procedures are in place.

Finally, the chapter dealt with the subject of PC accounting systems. The modular design of these systems allows users to tailor the system to their specific needs. This feature has resulted in a tremendous growth in end-user computing that is changing the way many organizations do business. The PC environment poses some unique exposures that accountants must recognize. Three of the most serious exposures are

(1) the lack of properly segregated duties, (2) PC-operating systems that do not have the sophistication of mainframes and expose data to unauthorized access, and (3) computer failures and inadequate backup procedures that rely too heavily on human intervention and thus threaten the security of accounting records.

Comments

Post a Comment

Popular posts from this blog

The Conversion Cycle:The Traditional Manufacturing Environment

By -
Image
The Traditional Manufacturing Environment The conversion cycle consists of both physical and information activities related to manufacturing products for sale. The context-level data flow diagram (DFD) in Figure 7-1 illustrates the central role of the conversion cycle and its interactions with other business cycles. Production is triggered by customer orders from the revenue cycle and/or by sales forecasts from marketing. These inputs are used to set a production target and prepare a production plan, which drives production activities. Purchase requisitions for the raw materials needed to meet production objectives are sent to the purchases procedures (expenditure cycle), which prepares purchase orders for vendors. Labor used in production is transmitted to the payroll system (expenditure cycle) for payroll processing. Manufacturing costs associated with intermediate work-in-process and finished goods (FG) are sent to the general ledger (GL) and financial reporting system. Dependin
Read more

The Revenue Cycle:Manual Systems

By -
Image
Manual Systems The purpose of this section is to support the system concepts presented in the previous section with models depicting people, organizational units, and physical documents and files. This section should help you envision the segregation of duties and independent verifications, which are essential to effective internal control regardless of the technology in place. In addition, we highlight inefficiencies intrinsic to manual systems, which gave rise to modern systems using improved technologies. SALES ORDER PROCESSING The system flowchart in Figure 4-12 shows the procedures and the documents typical to a manual sales order system. In manual systems, maintaining physical files of source documents is critical to the audit trail. As we walk through the flowchart, notice that in each department, after completion of the assigned task, one or more documents are filed as evidence that the task was completed. Sales Department The sales process begins with a customer cont
Read more

HIPO (hierarchy plus input-process-output)

By -
Image
HIPO (hierarchy plus input-process-output) 64.1 Purpose The HIPO (Hierarchy plus Input-Process-Output) technique is a tool for planning and/or documenting a computer program. A HIPO model consists of a hierarchy chart that graphically represents the program’s control structure and a set of IPO (Input-Process-Output) charts that describe the inputs to, the outputs from, and the functions (or processes) performed by each module on the hierarchy chart. 64.2 Strengths, weaknesses, and limitations Using the HIPO technique, designers can evaluate and refine a program’s design, and correct flaws prior to implementation. Given the graphic nature of HIPO, users and managers can easily follow a program’s structure. The hierarchy chart serves as a useful planning and visualization document for managing the program development process. The IPO charts define for the programmer each module’s inputs, outputs, and algorithms. In theory, HIPO provides valuable long-term documentation. However
Read more