Ais Final Part 1

Front 1

Normal Balance

Back 1

The side where increases in the account are recorded. It is either a debit or credit balance depending on the account

Assets normal balance= Debits

Liabilities normal balance= Credits

Front 2

Matching Principle

Back 2

Expenses are matched with revenues in the period when efforts expended to generate revenues

-Some events are not recorded daily, supplies used and wages by employees

-some costs expire with the passage of time

Front 3

Revenue recognition principle

Back 3

Revenues are recognized when they are released (usually when goods are transferred) and are technically earned, no matter when cash is received

Front 4

System flowchart

Back 4

The graphical representation of the physical relationships among the key elements of a system

- Elements include departments, manual activities, computer programs, hard-copy and digital accounting records

- Also describes the physical computer media being employed

-Shows processing of a single transaction only

Front 5

Batch systems

Back 5

Assemble transaction in groups, resulting in a time lag.

-Generally fewer resources required with a batch system

Operational efficiency: Batch processing of noncritical accounts eliminates unnecessary activities at critical points in the process

Front 6

Real-time systems

Back 6

Prossess transactions individually as they occur, with no time lag

Batch processing using real-time data collection: Popular approach that captures and processes some aspects of a transaction when it occurs and other aspects in batch mode

Front 7

Group Codes

Back 7

Used to represent complex items or events involving two or more pieces of related data

- Zones or Fields have specific meaning

-Represents large and diverse data

-Complex data

-Detailed analysis and reporting

Disadvantages: are over used which can increase costs and linking of unrelated data

Front 8

Alphabetic codes

Back 8

- May use sequential, block or group coding techniques

-can represent large numbers of items

Disadvantages: Difficult to rationalize meaning and difficult to sort

Front 9

Mnemonic Codes

Back 9

Acronyms that convey meaning

- Codes convey a high degree of information

Disadvantage: limited ability to represent items within a class

Front 10

Block codes

Back 10

Can be used to represent whole classes of items by restricting each class to a specific range within the coding scheme

example of this is chart of accounts

Front 11

Five elements of Fraud

Back 11

1) False representation

2) Material fact

3) Intent to deceive

4) Justifiable reliance

5) Injury or loss

Front 12

Fraud Triangle

Back 12

1) Situational Pressures

2) Opportunity

3) Ethics

Front 13

Lapping

Back 13

- a type of cash larceny (stealing cash after it is recorded)

-a clerk steals cash given by a customer and does not record it

Front 14

Check digit

Back 14

a control digits that is added to the data code when originally assigned.

-allows integrity to be established during processing and help prevent two common errors:

1) transcription errors: occur when extra digits are added to a code, a digit is omitted from a code, a digit is recored incorrectly

2) transposition errors- occurs when digits are reversed

Front 15

Limit check

Back 15

Used to identify field values that exceed an authorized limit

Front 16

Section 302 of SOX

Back 16

Requires management to certify organization's internal controls on a quarterly and annual basis

Front 17

Section 404 of SOX

Back 17

Requires management to assess internal control effectiveness

Front 18

COSO internal control framework five components

Back 18

1) Risk Assessment

2) Monitoring

3) Control activités

4) Information and communication

5) Control Environment

Front 19

Physical Controls

Back 19

1) Segregation of duties

2) Supervision

3) Accounting Records

4) Access Control (to ensure that only authorized personnel have access to the firm's assets

5) Independent Verification (independent checks of accounting system to identify errors and misrepresentations)

Front 20

Segregation of Duties

Back 20

designed to minimize incompatible functions including separating:

1) transaction authorization and processing

2) Asset custody and record keeping.

This way successful fraud requires collusion

Front 21

SAS 99

Back 21

Objective is to seamlessly blend fraud consideration into all phases of the audit process

Front 22

Three major subsystems of accounting

Back 22

1) Transaction processing system (TPS)- Supports daily business operations

2) General ledger/financial reporting system (GL/FRS)- Produces reports

3) Management reporting system (MRS)- Info for decision making

Front 23

Source documents

Back 23

Used to capture and formalize transaction data needed for transaction processing

Front 24

General ledgers

Back 24

contain account information in highly summarized control accounts

Front 25

Subsidiary ledgers

Back 25

Contain details for each of the individual accounts that constitute a particular control account

Front 26

Flat-File model

Back 26

Individual data files are not related to other files.

leads to 3 data redundancy problems:

1) Data storage- Companys must incur the cost of multiple collection and storage procedures

2) Data updating- Changes or additions must be preformed multiple times

3) Currency of Information- If update info is not properly disseminated, changes will not be reflected in some users data, resulting in decisions based on outdated information

other problems: inability to obtain additional info as needs change, separate files are difficult to integrate across multiple users

Front 27

Audit Trail

Back 27

Traces account balances contained in the financial statements back to source documents and the economic events that created them