Ais Chapter 13

Front 1

Conversion process

Back 1

Typically associated with manufacturing enterprises. Its basic purpose is to convert direct material, direct labor, and MOH into a finished product. Collectively direct material, direct labror, and MOH are often referred to as factors of prooduction.

Front 2

MOH is composed of

Back 2

Everything else in production besides direct labor and direct materials.Includes items such as factory equipment depreciation, salaries of factory sups, factory utilities, and custodial costs.

Front 3

job costing

Back 3

in Job costine goods are produced "to order." Units of product are differentiated; that is, you an tell the difference between them by looking at them.

Front 4

process costing

Back 4

most closely associated with undifferentiated, mass-produced goods.

Front 5

Hybrid between job costing and process costing systems.

Back 5

In a hybrid system, a basic unit might be mass produced, but then customized based on a client's order. You also may have studied standard cost systems which track differences between actual and budgeted performance.

Front 6

Materials requisition
Purpose:
Originates:
Receipient:

Back 6

Purpose: Requests raw material from the warehouse for production.
Originates: Production
Receipient: Warehouse

Front 7

Job cost sheet
Purpose:
Originates:
Receipient:

Back 7

Purpose: Summarizes the material, labor, and overhead costs in a job costing system.
Originates: Production
Receipient: Accounting

Front 8

Labor time ticket
Purpose:
Originates:
Receipient:

Back 8

Purpose: Accumulates labor data (time, pay rate, total labor costs).
Originates: Production
Receipient: Accounting

Front 9

Production cost report
Purpose:
Originates:
Receipient:

Back 9

Purpose: Summarizes cost and quantity information in a process costing system.
Originates: Production
Receipient: Accounting

Front 10

Materials move ticket
Purpose:
Originates:
Receipient:

Back 10

Purpose: Documents movement of materials from the warehouse into production
Originates: warehouse
Receipient: production

Front 11

Internal controls mentioned before which are applicable to conversion cycle:

Back 11

Raw materials must be safeguarded; in many cases, raw materials requre special storage conditions to reamin usable. Internal controls such as adequate documentation, physical safeguards, and backup power supplies for AC and other enviornment regulators can help an org achieve its objectives with respect to raw materials. Separation of duties applies here as well. In many organizaitons, physical custody is in the warehuse. Authorization for use coes from production in form of material requisitions; the accounting department takes care of journal entries. Periodic training on issues such as equipment operation and safety are important internal controls for the human element of conversion systems.

Front 12

Financing process

Back 12

The financing process deals with transactions between an organization and its stockholders, as well as between an organization and its long-term creditors. Financial statement users see the results of the financing process in the long-term debt and equity sections of a balance sheet; those same sections are associated with cash flows from financing activities on the statement of cash flows.

Front 13

Financing process transactions

Back 13

1. Issuance of capital stock
a. number of shares
b. par value per share
c. market value per share
d. shareholder identification data (such as name and address)
2. Purchase of treasury shares
a. number of shares
b. price per share
c. shareholder identification data
3. Long term debt transactions
a. principal
b. coupon interest rate
c. market interest rate at time of issuance
d. time to repayment
e. number of annual interest payments
f. lender identification data
4. dividend distribution
a. tye of dividend (cash, stock, property)
b. Shareholder identification data
c. Amount of dividend
d. Dates
i. declaration
ii. record
iii. distribution.

Front 14

What are the 4 types of financing process transactions?

Back 14

1. issuance of common stock
2. purchase of treasury shares
3. long term debt transactions
4. dividend distributions

Front 15

What is the biggest risk associated iwth financing process?

Back 15

The biggest risk with the financing business process is the misappropriation of cash, either through skimming or larceny.

Front 16

The internal controls discussed in previous chapters are least applicable to financing:

Back 16

separation of dutioes, bank reconciliations, and adequate documentation.

Front 17

Risks involved in the financing process:

Back 17

Missing payment deadlines--Can be mediated by automatic electronic funds transfers or simpe scheduling software installed on accounting department computers
insufficient cash to repay principals.--a sinking fund can be used to mitigate the risk of insufficient cash to repay principal.
Debt covenant--A lender may institute a debt covenant as an internal control. Debt covenants may restrict the borrower's ability to pay dividends to shareholders specify a minimum current ratio level thoughout the life of the debt, or hold the borrowing organization accountable for its overall financial leverage.

Front 18

Human resource process includes

Back 18

hiring employees
paying them
coordinating employee benefits (insurance, pensions, and the like)
Evaluating their performance
Managing their departures from the firm via termination, quitting, or retirement.

Front 19

What is hte most complex of all business processes?

Back 19

The most complex business process is human resource management

Front 20

What happens to human resource management since it is the most complex business process?

Back 20

Since it is so complex and has high legal stakes, many companies outsource their human resource functions to organizations such as ADP.

Front 21

What is the focus of AIS in human resource management?

Back 21

In AIS, the main concern is caputuring data necessary to make informed decisions in each of the preceeding areas, as well as providing sufficient cost-effective internal cntrols to mitigate human resource risks. Capturing necessary data is most often accomplished via paper or electronic payroll forms.

Front 22

Risks associated with human resource process

Back 22

Financial risks--Financially, managers must ensure tht they have sufficient cash on hand to meet payroll obligations. Companies often maintain a payroll checking account separate from regular operating accounts. In addition, companies that pay employees by the hour typically need a way of tracking hours worked. Typically an interent time tracking system will be used. When employees quit their access to information systems (aka intranet accounts passwords) should be eliminated to mitigate the risk of hacking, sabatoge, and other forms of fraud
human risks--some say these are highest because of long term nature and potential costly litigation. HR risks include hiring unqualified workers, failure to follow applicable laws, engaging in acts of sexual harrassment and illegal or inappropriate employee terminations.
Best internal control may be hiring well informed educated HR staff, seeking legal counsel may be appropriate and adequate documentation is also required.

Front 23

Fraud as an HR risk Internal controls

Back 23

1. thorough background checks.
2. forced vacations. Why does this help? Consider the case of A/R lapping. A/R lapping occurs when a clerk steals money sent by one client, then uses money from another client to cover up theft. For example, a clerk may steal money from Smith; then, when Jones pays her bill, the clerk would credit money to Smith's account. Maintaining a lapping system reuires ongoing fraud so if an employee is forced to take a vacation, there's a greater chance of detecting fraud than if the vacations are not mandatory.
3. adequate training and supervision.

Front 24

Form W-4
Purpose:
Data Included:

Back 24

Purpose: Establishes payroll witholding information
Data Included: Employee identification data
Withholding status
Number of withholding allowances

Front 25

Form W-2
Purpose:
Data Included:

Back 25

Purpose: Reports year-end information for tax purposes
Data Included: Employee identification data
employer identification data
gross pay and tax withholdings
401k contributions

Front 26

Payroll register
Purpose:
Data Included:

Back 26

Purpose: Computes payroll data for all employees for a given period
Data Included:
Employee identification data
Hours worked
Hourly wage
Total gross pay
Tax and benefit withholdings
Net pay

Front 27

Employee earnings record
Purpose:
Data Included:

Back 27

Purpose: Summarizes payroll data for a single employee for multiple pay periods
Data Included:
Same as payroll register

Front 28

Form 1099
Purpose:
Data Included:

Back 28

Purpose: REports amounts paid to an independent contractor. (I.C.)
Data Included: I.C. identification data
Payers identification data
total amount paid

Front 29

Form 940
Purpose:
Data Included:

Back 29

Purpose: Reports employer's fedreal unemployment tax
Data Included:
Company name
Amount paid

Front 30

Form 941
Purpose:
Data Included:

Back 30

Purpose: Reports amounts witheld by employer to IRS
Data Included:
Company name
employee identification data
amount withheld.

Front 31

Risks associated with production operations.

Back 31

1. Theft of inventory/assets
2. Poor performance Staff unreliable
3. Disaster recovery (fire, natural disaster).

Front 32

Risk: Theft of inventory or assets

Back 32

1. Physical access controls
2. Move tickets--documentation requesting move from storage to production.
3. Engraved id or serial numbers on big assets like computers
4. separation of duties custody and inventory
5. physical counts

Front 33

Risk: Poor performance / Staff unreliable

Back 33

1. Training
2. Performance reviews and Evals.
3. Bonding--insurance against theft, lies, deceipt.

Front 34

Risk: Disaster recovery

Back 34

1. Insurance--both for replacement and loss of business
2. Physical safeguards like sprinkler systems
3. Backup and disaster recovery.

Front 35

Risks associated with cost accounting

Back 35

Inaccurate allocation of Overhead.

Front 36

Risk: Inaccurate allocation of overhead

Back 36

1. Accurate activitiy based cost drivers such as hours of light used.

Front 37

HR/Legal risks

Back 37

Hiring unqualified or sketch employees.

Front 38

Risk: Hiring unqualified or sketch employees

Back 38

1. Background checks
2. Drug screening
3. Verification of employment references, degrees, certifications.

Front 39

Master payroll risks

Back 39

1. Unauthorized changes to payroll master data
2. Inaccurate changes to payroll.

Front 40

Risk: Unauthorized changes to payroll master data

Back 40

1. Segregation of duties between hr and payroll.
2. STRONG access controls to master data files

Front 41

Risk: Inaccurate changes to payroll

Back 41

1. Accuracy checks of payroll updates
2. Data processing controls--limit checks, reasonability checks

Front 42

Weekly / Periodic Payroll Risks

Back 42

1. Inaccurate time or attendance
2. Errors in processing
3. Theft or fraud in distribution of payroll. aka someone could create a fictitious employee

Front 43

Risk: Inaccurate time or attendance

Back 43

1. Supervisor reviews of time cards
2. Authentication required such as signatures, swipes, biometrics--which influde eye scans, fingerprints, hand scanners, face recognition, voice recognition. If you just have an employee number you can sign in for yourself as well as for someone else.

Front 44

Risk: Errors in processing

Back 44

1. Earnings statements
2. Supervisor reviews of budgets

Front 45

Risk: Theft or fraud in distribution of payroll

Back 45

1. ID required for pickup of checks
2. Distributor seprarte from senator.
3. Direct deposit
4. Redeposit of all unclaimed paychecks or bounced EFT's
5. All bounced transactions investigated.
6. Distribute payroll debit cards rather than checks.

Front 46

What questions can appear on an internal control questionaire regarding the conversion cycle?

Back 46

1. Are there physical access controls to prevent theft of inventory?
2. Is a move ticket created when a move from storage to production is requested?
3. Is a physical count of inventory on hand required on a regular basis?
4. Do staff members receive performance reviews?
5. Are employees bonded?
6. Are you insured against replacement of buildings?
7. Are you insured against loss of business?
8. Are there physical safeguards in place such as sprinklers to protect inventory?
9. Do employees receive ongoing training to keep them up to date?
10. Is there separation of duties between physical custody of inventory and authorization?