1.

a)
b)
c)
d)

Data differ from information in which way?

Data are output, and information is input.
Information is output, and data are input.
Data are meaningful bits of information.
There is no difference.

1.

a)
b)
c)
d)

Data differ from information in which way?

Data are output, and information is input.
Information is output, and data are input.
Data are meaningful bits of information.
There is no difference.

2. Which of the following is NOT a

characteristic that makes information useful?
a)
b)
c)
d)

It
It
It
It

is
is
is
is

reliable.
timely.
inexpensive.
relevant.

2. Which of the following is NOT a

characteristic that makes information useful?
a)
b)
c)
d)

It
It
It
It

is
is
is
is

reliable.
timely.
inexpensive.
relevant.

3. Which transaction cycle includes interactions

between an organization and its suppliers?
a)
b)
c)
d)

Revenue cycle.
Expenditure cycle.
Human resources/payroll cycle.
General ledger and reporting system.

3. Which transaction cycle includes interactions

between an organization and its suppliers?
a)
b)
c)
d)

Revenue cycle.
Expenditure cycle.
Human resources/payroll cycle.
General ledger and reporting system.

4. Which of the following is NOT a means by

which information improves decision making?
a)
b)
c)

d)

Increases information overload.

Reduces uncertainty.
Provides feedback about the effectiveness
of prior decisions.
Identifies situations requiring management
action.

4. Which of the following is NOT a means by

which information improves decision making?
a)
b)
c)

d)

Increases information overload.

Reduces uncertainty.
Provides feedback about the effectiveness
of prior decisions.
Identifies situations requiring management
action.

5. In which cycle does a company ship goods

to customers?
a)
b)
c)
d)

Production cycle.
Financing cycle.
Revenue cycle.
Expenditure cycle

5. In which cycle does a company ship goods

to customers?
a)
b)
c)
d)

Production cycle.
Financing cycle.
Revenue cycle.
Expenditure cycle

6. Which of the following is a function of AIS?

a)
b)
c)

d)

Reducing the need to identify a strategy and

strategic position.
Transforming data into accounting
information.
Allocating organizational resources.
Automating all decision making.

6. Which of the following is a function of AIS?

a)
b)
c)

d)

Reducing the need to identify a strategy and

strategic position.
Transforming data into accounting
information.
Allocating organizational resources.
Automating all decision making.

7. Which of the following is NOT true about

accounting information systems (AIS)?
a)
b)
c)

d)

All AISs are computerized.

AIS may report both financial and non-financial
information.
AIS, in addition to collecting and distributing
large amounts of data and information, also
organize and store data for future uses
A student who has an interest in both
accounting and IT will find many job
opportunities that combine these knowledge
and skills areas.

7. Which of the following is NOT true about

accounting information systems (AIS)?
a)
b)
c)

d)

All AISs are computerized.

AIS may report both financial and non-financial
information.
AIS, in addition to collecting and distributing
large amounts of data and information, also
organize and store data for future uses
A student who has an interest in both
accounting and IT will find many job
opportunities that combine these knowledge
and skills areas.

8. Information is
a)
b)
c)
d)

Data.
Processed Data.
Manipulated input.
Computer output

8. Information is
a)
b)
c)
d)

Data.
Processed Data.
Manipulated input.
Computer output

9. Data by itself is not useful unless

a)
b)
c)
d)

It
It
It
It

is
is
is
is

massive.
processed to obtain information.
collected from diverse sources.
properly stated

9. Data by itself is not useful unless

a)
b)
c)
d)

It
It
It
It

is
is
is
is

massive.
processed to obtain information.
collected from diverse sources.
properly stated

10. For taking decisions data must be

a)
b)
c)
d)

Very accurate.
Massive.
Processed correctly.
Collected from diverse sources

10. For taking decisions data must be

a)
b)
c)
d)

Very accurate.
Massive.
Processed correctly.
Collected from diverse sources

Important Control Activities

Controls relating to processing of a

transaction

Segregation of duties

Physical control over assets and records

Performance review

Three main activitiesa)

b)
c)

Proper authorization
Proper documentation
Independent checks

Proper authorization of transactions

should occur so that only valid
transactions get processed.
Authorizations may be classified as:
a)

b)

General
Specific

General Authorization:

Top management establishes policies and subordinates are

instructed to follow these general guidelines.
For example, an entity sets a monthly credit limit of Tk.
1,000,000 for all customers. Then, its sales persons will allow
customers to purchase on account up to the limit on a monthly
basis. They do not need to ask for permission on every credit
sales transaction. To be efficient , there might be

financial authority matrix.

Based on the matrix sales orders will be approved by

authorized person.

Specific Authorization:
Specific authorization is required for specific
individual (non-routine) transaction.
For example, an entity requires specific
authorization on credit sales over the

pre-determined credit limit.

Documentation is very critical control activity

because it preserves evidence to

substantiate a decision, event, transaction,

or system. All documentation should be
complete, accurate, and recorded timely.
Documentation should have a clear purpose
and be in a usable format that will add to the
efficiency and effectiveness of the entity.

For example, Transactions should be

traceable from inception through

completion to demonstrate how entitys

resources were utilized and control activities

were applied to ensure compliance with entitys
objectives. This means the entire life cycle of a
transaction should be documented, including:
(1) identifying the initiator and authorizer; (2)
tracking progress and hand-offs through all
stages of processing; and, (3) pinpointing
where documentation is maintained.

Documentation principles:

pre-numbered consecutively and accounted

prepared at the time of the transaction or

as soon afterward as possible in order to reduce the

for by someone other than the preparer to facilitate

control over missing documents and to aid in locating
documents when they are needed at a later date;
likelihood of error;

sufficiently simple so that they can be readily

designed for multiple use whenever possible,

understood;

which can help minimize the number of different

forms and reduce the duplication of effort;

Each yes answer to the following question is a

potential problem indication:

Are blank checks ever signed?

Are checks ever signed without original
supporting documentation?
Supporting documentation is rarely verified
against the actual check written?
Are checks ever signed without canceling (i.e.
initialed, approved, stamped, etc.) the supporting
documentation?
Are funds ever transferred between accounts by
one person without review or verification?
Are checks ever signed for new business vendors
without knowing and/or verifying their name and
association with the concerned person?

 Internal

verification involves

External

verification indicates

review, comparison, and reconciliation

of information from two sources.
Might be done by internal auditor.

whether the companys financial

statements fairly present its financial
position and results.

Certain accounting and bookkeeping

functions are designed to crossreference each other for accuracy. If the
same person is responsible for multiple
duties, the natural check and balance system
is removed and/or circumvented.
Trust is not the issue; the issue is verifying
business transactions. Giving a single person
unquestioned authority of your finances is
not a wise business practice.

Optimally, one person should only have one of

these responsibilities:

Authorization
Recording
Verification
Custody of assets
Managerial review

Each yes answer to the following question is a

potential problem indication:

Is the person who handles your cash also

responsible for recording cash?
Does the person who pays or orders
materials/supplies also responsible for receiving
and/or approving the invoice?
Are two or fewer people responsible for the
accounting function?
Is there only one person responsible for
reviewing financial statements each month?
Is the review of financial journal entries and
transactions irregular?

Access to equipment, inventories, securities,

cash and other assets should be restricted.
Also, assets should be periodically counted
and compared to amounts shown on control
records.
All important and confidential information
must be safeguarded against unauthorized
access, use or disposition.

Important points for safeguarding assets and

records:

Development of related policies and

procedures for safeguarding assets and
records;

These policies should be communicated

among employees of the organization;

Development of

disaster recovery plan;

Taking proper measures for ensuring
physical safeguard of the companys assets

periodic counting of the assets;

There should be proper records of the
Regular

assets;
Assets should be tagged with adequate
number;
The risk of unauthorized use or loss is
controlled by restricting access to
resources and records only to authorized
personnel.
Access restrictions and accountability
assignments for custody are periodically
reviewed and maintained; etc.

ID

Each no answer to the following question is a

potential problem indication:

Are signature stamps prohibited?

Are cheques restrictively endorsed upon receipt?
Are cash and cheques deposited daily, or kept in a
limited access and locked safe?
Is a list maintained of all office furniture, equipment,
company vehicles and all other assets?
Is adequate insurance coverage in place for assets?
Are all computers (workstations and network) backed
up on a daily basis?
Are all computer/network backups stored off-site on
a regular basis?
Are all computers and programs password protected?
Are passwords required to be changed on a regular
basis; i.e. at least every 6 months?

Management should compare

information about current
performance to budgets, forecasts,
prior periods, or other benchmarks
to measure the extent to which goals
and objectives are being achieved and
to identify unexpected results or
unusual conditions that require
follow-up.

John is responsible for the maintenance of the fixed

asset register of the company. He is also responsible
for preparing a reconciliation of the fixed asset
register to the general ledger accounts on a regular
basis. He also records all purchases and sales of
fixed assets in the accounting records. John signs all
documents and reconciliations he prepares.
Required:
Identify the weaknesses from the above-mentioned
scenario.

John performs incompatible duties, since he:

is responsible for the maintenance of the

fixed asset register;
prepares a reconciliation between the fixed
asset register and the general ledger
accounts; and
records all purchases and sales of fixed
assets in the accounting records.

Case Study
The following is the description of the purchasing system
at CB Ltd. No other controls exist apart from those
described.
The company has no buying department so employees
place orders in their own area of responsibility. A three part
order form is used; copy 1 is retained by the originator,
copy 2 is sent to the goods inward department and copy 3
is sent to the supplier.

Goods are received, but not checked, by the goods

inwards clerk. Once received, the advice note and purchase
order for those goods are sent to the purchase ledger
clerk.

Case Studycont
When the suppliers invoice is received the purchase ledger
clerk checks the calculations on it, initials it and staples the
advice note and purchase order to it. The person enters the
invoice on to the purchase ledger.
The invoice is then sent to the manager responsible for the
employee who ordered the goods. The manager codes the
invoice and returns it to the purchase ledger clerk. Purchase
invoices are coded, entered on an analysis sheet and posted to
the nominal ledger monthly by journal entry.

The cashier pays suppliers monthly on instructions from the

purchase ledger clerk. The purchase ledger control account is
reconciled monthly by the purchase ledger clerk who also
reconciles suppliers statements.

Case Study Analysis

no buying department

The company has

so employees place orders in
their own area of responsibility. A three part order form is used; copy 1 is retained by the
originator, copy 2 is sent to the goods inward department and copy 3 is sent to the
supplier.
Goods are received, but not checked, by the goods inwards clerk. Once received, the
advice note and purchase order for those goods are sent to the purchase ledger clerk.
When the suppliers invoice is received the purchase ledger clerk checks the calculations
on it, initials it and staples the advice note and purchase order to it. The person enters
the invoice on to the purchase ledger.
The invoice is then sent to the manager responsible for the employee who ordered the
goods. The manager codes the invoice and returns it to the purchase ledger clerk.
Purchase invoices are coded, entered on an analysis sheet and posted to the nominal
ledger monthly by journal entry.
The cashier pays suppliers monthly on instructions from the purchase ledger clerk. The
purchase ledger control account is reconciled monthly by the purchase ledger clerk who
also reconciles suppliers statements.

Case Study Analysiscont.

The company no buying department so employees place orders in their own area of

order form (not numbered)

responsibility. A three part

is used; copy 1
is retained by the originator, copy 2 is sent to the goods inward department and copy 3 is
sent to the supplier.
Goods are received, but not checked, by the goods inwards clerk. Once received, the
advice note and purchase order for those goods are sent to the purchase ledger clerk.
When the suppliers invoice is received the purchase ledger clerk checks the calculations
on it, initials it and staples the advice note and purchase order to it. The person enters
the invoice on to the purchase ledger.
The invoice is then sent to the manager responsible for the employee who ordered the
goods. The manager codes the invoice and returns it to the purchase ledger clerk.
Purchase invoices are coded, entered on an analysis sheet and posted to the nominal
ledger monthly by journal entry.
The cashier pays suppliers monthly on instructions from the purchase ledger clerk. The
purchase ledger control account is reconciled monthly by the purchase ledger clerk who
also reconciles suppliers statements.

Case Study Analysiscont.

The company no buying department so employees place orders in their own area of
responsibility. A three part order form is used; copy 1 is retained by the originator, copy 2
is sent to the goods inward department and copy 3 is sent to the supplier.
Goods are received,

but not checked, by the goods inwards clerk. Once

received, the advice note and purchase order for those goods are sent to the purchase
ledger clerk.
When the suppliers invoice is received the purchase ledger clerk checks the calculations
on it, initials it and staples the advice note and purchase order to it. The person enters
the invoice on to the purchase ledger.
The invoice is then sent to the manager responsible for the employee who ordered the
goods. The manager codes the invoice and returns it to the purchase ledger clerk.
Purchase invoices are coded, entered on an analysis sheet and posted to the nominal
ledger monthly by journal entry.
The cashier pays suppliers monthly on instructions from the purchase ledger clerk. The
purchase ledger control account is reconciled monthly by the purchase ledger clerk who
also reconciles suppliers statements.

Case Study Analysiscont.

The company no buying department so employees place orders in their own area of
responsibility. A three part order form is used; copy 1 is retained by the originator, copy 2
is sent to the goods inward department and copy 3 is sent to the supplier.
Goods are received, but not checked, by the goods inwards clerk. Once received, the
advice note and purchase order for those goods are sent to the purchase ledger clerk.

the purchase ledger clerk checks

the calculations on it, initials it and staples the advice note
and purchase order to it. The person enters the invoice on to the purchase
When the suppliers invoice is received

ledger.

The invoice is then sent to the manager responsible for the employee who ordered the
goods. The manager codes the invoice and returns it to the purchase ledger clerk.
Purchase invoices are coded, entered on an analysis sheet and posted to the nominal
ledger monthly by journal entry.
The cashier pays suppliers monthly on instructions from the purchase ledger clerk. The
purchase ledger control account is reconciled monthly by the purchase ledger clerk who
also reconciles suppliers statements.

Case Study Analysiscont.

The company no buying department so employees place orders in their own area of
responsibility. A three part order form is used; copy 1 is retained by the originator, copy 2
is sent to the goods inward department and copy 3 is sent to the supplier.

Goods are received, but not checked, by the goods inwards clerk. Once received, the
advice note and purchase order for those goods are sent to the purchase ledger clerk.
When the suppliers invoice is received the purchase ledger clerk checks the calculations
on it, initials it and staples the advice note and purchase order to it. The person enters
the invoice on to the purchase ledger.
The invoice is then sent to the manager responsible for the employee who ordered the
goods. The manager codes the invoice and returns it to the purchase ledger clerk.

and posted to
the nominal ledger monthly by journal entry.
Purchase invoices are coded, entered on an analysis sheet

The cashier pays suppliers monthly on instructions from the purchase ledger clerk. The
purchase ledger control account is reconciled monthly by the purchase ledger clerk who
also reconciles suppliers statements.

Case Study Analysiscont.

The company no buying department so employees place orders in their own area of
responsibility. A three part order form is used; copy 1 is retained by the originator, copy 2
is sent to the goods inward department and copy 3 is sent to the supplier.

Goods are received, but not checked, by the goods inwards clerk. Once received, the
advice note and purchase order for those goods are sent to the purchase ledger clerk.
When the suppliers invoice is received the purchase ledger clerk checks the calculations
on it, initials it and staples the advice note and purchase order to it. The person enters
the invoice on to the purchase ledger.
The invoice is then sent to the manager responsible for the employee who ordered the
goods. The manager codes the invoice and returns it to the purchase ledger clerk.
Purchase invoices are coded, entered on an analysis sheet and posted to the nominal
ledger monthly by journal entry.
The cashier pays suppliers monthly on instructions from the purchase ledger clerk.

The

purchase ledger control account is reconciled monthly by the purchase

ledger clerk who also reconciles suppliers statements.

1st Weakness
No buying department
There is no buying department.
Risk:
Staff may not buy the products at reasonable price
May create scope for buying excess or duplicate
products

2nd Weakness:

Unnumbered Order Form

The purchase order notes appear to be
unnumbered.

Risk:
So purchase order notes could go missing.

3rd Weakness
Goods not checked
Goods are not checked for quality on arrival
Risk:
Company may accept damaged goods. (the
valuation of inventory may be wrong)

4th Weakness
Goods Received Notes
Dean does not generate Goods Received Notes.
(GRN)
Risk:
Concerned person will not be able to tell what
stock has arrived.

5th Weakness
Purchase Day Book
There is no purchase day book. (PDB) instead
Journals are used monthly
Risk:
So company will not know who they owe at any
point.

6th Weakness:

Lack of segeration
The purchase ledger clerk perfoms all the duties in
purchase orders.

Risk:
So person could cover up the fraud.

Any Questions?

58

Amin Siddiki FCA