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IT Auditing James Hall Chapter 6 Notes

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14 views2 pages

IT Auditing James Hall Chapter 6 Notes

Uploaded by

Alden Manaligod
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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TRANSACTION PROCESSING AND FINANCIAL REPORTING SYSTEMS OVERVIEW

TRANSACTION PROCESSING

- An economic event that affects the assets and equities of the firm, is reflected in its accounts, and is measured in
monetary terms

- Transaction cycles

o Expenditure cycle
 Purchases/accounts payable system (physical component)
 Recognizes the need to acquire physical inventory places an order with the vendor
 When the goods are received, the purchases system records the event by increasing
inventory and establishing an account payable to be paid at a later date
 Cash disbursements system (financial component)
 When the obligation created in the purchases system is due:
o The cash disbursements system authorizes the payment
o Disburses the funds to the vendor
o Records the transaction by reducing the cash and accounts payable accounts
 Payroll system (financial component)
 Collects labor usage data for each employee
 Computes the payroll
 Disburses paychecks to the employees
 Fixed asset system: Processes transactions pertaining to the acquisition, maintenance, and
disposal of its fixed assets

o Conversion cycle
 Production system: Involves the planning, scheduling, and control of the physical product
through the manufacturing process
 Cost accounting system: Monitors the flow of cost information related to production

o Revenue cycle
 Sales order processing (physical component)
 Preparing sales orders
 Granting credit
 Shipping products to customers
 Billing customers
 Recording transactions in the accounts (A/R, inventory, expenses, sales)
 Cash receipts (financial component)
 Collecting cash
 Depositing cash in the bank
 Recording the abovementioned events in the accounts

ACCOUNTING RECORDS

- Manual systems
o Documents: Provides evidence of an economic event and may be used to initiate transaction processing
 Source documents: Used to capture and formalize transaction data needed for transaction
processing
 Product documents: The result of transaction processing
 Turnaround documents: A product document of one system that becomes a source document
for another system
o Journals: A record of chronological entry
 Special journals: Specific classes of transactions that occur in high frequency
 General journal: Nonrecurring, infrequent, and dissimilar transactions

o Ledgers: A book of financial accounts that reflects the financial effects of the firm’s transactions after
they are posted from the various journals
 General ledger: Shows activity for each account listed on the chart of accounts
 Subsidiary ledger: Shows activity by detail for each account type

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