(B) DISCUSS THE GIVEN STATEMENTS.
1) Information technology most certainly benefits an entity’s internal control in a way that all business activities can be performed more proficiently. During the older generations, before the invention of technology, accounts were paper based which cost a lot of time and was vulnerable to misstatements and errors. Transactions took time to process as they were handwritten and payroll sheets took hours to be made. However, after the invention of technology, accounts were computerized which reduced the paperwork, trimmed the processing time, and decreased errors. Although information technology comes with risks such as threat to hardware, decreased audit trail and need for IT specializations, yet it enhances …show more content…
Data mining, also known as knowledge discovery in databases, is a computerized process of skimming through large amounts of raw data and extracting essential new, hidden or unanticipated information that can be resourceful for performing various analytical functions. It is categorized into two divisions: verification and discovery, and outcomes of both aid in prediction of future trends. With the mined information, auditors advocate changes in the business for improvement, prevent fraud, restore cash, reinforce controls and ensure compliance.
Data mining saves a lot of useful time for auditors through the computerized procedures and also creates different classes of information for coherence. Subsequently, data mining can assist auditors in discovery as well as verification during the audit process. For instance, auditors can request for an entire database access in order to verify any doubtful financial information such as checking misstated journal entries and duplicates of supplier invoices and payments. Similarly, data mining can also serve for discovering patterns that may point to potential frauds such as payroll frauds and expenses frauds, and locating orders to customers that were not …show more content…
1) Inventory turnover, calculated as sales divided by average inventory, is an efficiency ratio that measures how quickly an entity sells and replaces its inventory over a period of time. How many times an entity’s inventory is sold and replaced represent the business’s performance and how well it manages inventories. The higher the ratio, the better since it manifests that the business maintains strong sales.
A decrease in the inventory turnover ratio implies that the business is holding its inventory for a longer period of time as compared to previous measures. It may also denote that the business has weak sales, or there may be a decline in demand. Moreover, a poor maintenance of inventory management, overstocking of inventories and lack of monitoring also adversely affects the inventory turnover ratio.
2) The days’ sales outstanding demonstrates the average number of days it takes for a business to collect revenue from its trade receivables after it has made sales. It is usually computed on a daily, weekly or monthly basis. A low days’ sales outstanding is favorable as it illustrates that the business is capable to quickly produce revenues from its credit
1) Information technology most certainly benefits an entity’s internal control in a way that all business activities can be performed more proficiently. During the older generations, before the invention of technology, accounts were paper based which cost a lot of time and was vulnerable to misstatements and errors. Transactions took time to process as they were handwritten and payroll sheets took hours to be made. However, after the invention of technology, accounts were computerized which reduced the paperwork, trimmed the processing time, and decreased errors. Although information technology comes with risks such as threat to hardware, decreased audit trail and need for IT specializations, yet it enhances …show more content…
Data mining, also known as knowledge discovery in databases, is a computerized process of skimming through large amounts of raw data and extracting essential new, hidden or unanticipated information that can be resourceful for performing various analytical functions. It is categorized into two divisions: verification and discovery, and outcomes of both aid in prediction of future trends. With the mined information, auditors advocate changes in the business for improvement, prevent fraud, restore cash, reinforce controls and ensure compliance.
Data mining saves a lot of useful time for auditors through the computerized procedures and also creates different classes of information for coherence. Subsequently, data mining can assist auditors in discovery as well as verification during the audit process. For instance, auditors can request for an entire database access in order to verify any doubtful financial information such as checking misstated journal entries and duplicates of supplier invoices and payments. Similarly, data mining can also serve for discovering patterns that may point to potential frauds such as payroll frauds and expenses frauds, and locating orders to customers that were not …show more content…
1) Inventory turnover, calculated as sales divided by average inventory, is an efficiency ratio that measures how quickly an entity sells and replaces its inventory over a period of time. How many times an entity’s inventory is sold and replaced represent the business’s performance and how well it manages inventories. The higher the ratio, the better since it manifests that the business maintains strong sales.
A decrease in the inventory turnover ratio implies that the business is holding its inventory for a longer period of time as compared to previous measures. It may also denote that the business has weak sales, or there may be a decline in demand. Moreover, a poor maintenance of inventory management, overstocking of inventories and lack of monitoring also adversely affects the inventory turnover ratio.
2) The days’ sales outstanding demonstrates the average number of days it takes for a business to collect revenue from its trade receivables after it has made sales. It is usually computed on a daily, weekly or monthly basis. A low days’ sales outstanding is favorable as it illustrates that the business is capable to quickly produce revenues from its credit